Here's why stock market investors don't have to sweat the looming Trump-Biden showdown

• iCapital's investment chief is optimistic for markets as a key presidential election looms.
• History suggests investors don't have to sweat until closer to the general election in November.

In a tense election year, markets may be fretting over the turmoil and the eventual outcome of the Trump-Biden showdown, but according to iCapital's chief investment officer Anastasia Amoroso, investors don't have to worry for now about the impact to their portfolios.

All eyes may be on the coming election between incumbent Joe Biden and likely Republican nominee Donald Trump, but the market veteran says the input for stocks ultimately won't be political turmoil, and instead expects improving earnings and the Federal Reserve's easing of monetary policy to drive gains.

Voters and markets alike will be monitoring the New Hampshire primary on January 23, Amoroso said, as well as Super Tuesday on March 5 for confirmation of each party's nominees.

Ultimately, historical data suggests markets should progress without a hiccup until just before election day.

"In the last eight election cycles," Amoroso said, "the S&P 500 delivered a median return of +7.5% and +4.2% in the 12-months and 9-months leading up to election day, respectively, with positive outcomes 87% and 75% of the time, respectively."

As the cycle winds down and culminates in election day, however, stock returns taper, iCapital data shows.

Median returns for the S&P 500 moderate to 0.5% and 0.8% in the three-month and one-month periods before an election. Positive returns happen about half the time in both cases.

"We believe it is too early to worry about the outcome of the election," Amoroso said.

To be sure, investors should begin to monitor potential changes in taxes, tariffs, and technology, in iCapital's view.

For example, if Trump is indeed the Republican nominee, she said, markets may start to price in "potential upside to companies that benefit from tax cut extensions (which otherwise expire in 2025), or to domestically-focused companies with little foreign revenue exposure."

Similarly, investors can plan for downside risk related to anti-trust concerns or more hawkish trade policies.

"We will be watching for these divergences and crosscurrents closely, though they aren't apparent yet," Amoroso said. "In the meantime, the path of the markets is likely to be determined by the direction of Fed policy."