Worst-Case Election Scenario for Wall Street Would Be a Repeat of 2000 Election

Wall Street began the week with a big rally on Monday, but whether it's sustainable depends on what happens Tuesday night. Kristina Hooper, U.S. investment strategist with Allianz, expects markets will retreat if Republican nominee Donald Trump wins, but the worst-case scenario would be a contest that's too close to call. If that's the case, and results are contested, Hooper said investors would see "a pretty significant selloff" following by a prolonged depressed period for stocks. Hooper points to the 2000 election that resulted in recounts and legal challenges before the U.S Supreme Court. The court finally declared George W. Bush the winner more than a month later. In terms of positioning a portfolio ahead of Tuesday's election, Hooper said she is advising clients based on their investment time horizons. "If you have a long time horizon, this will really just be a blip. But if you have a short time horizon, it could materially impact your situation," explained Hooper. "For those who have a short term time horizon, raising cash, overweighting gold -- measures like that to lower volatility and protect and protect on the downside -- make sense." For Wall Street, the best thing that might come out of the election, regardless of who wins, is an increase in fiscal spending. "With Clinton, it's more about actual spending. It would come in a variety of areas, including infrastructure spending, which is probably the area that will most likely garner support from Republicans," said Hooper. "Typically, infrastructure spending does have a positive impact on the economy." Hooper said a Trump presidency would like mean tax cuts. "Where he could have a positive impact on the economy is probably corporate tax reform. We do have a very high corporate tax rate in the United States, and this would make us far more competitive," she said.