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Monday's presidential debate could be moment of truth for election-and stocks

Evrim Aydin | Anadolu Agency | Getty Images

The first presidential debate Monday may be a near-term catalyst for stocks, if either candidate looks set to break out.

So far, Wall Street has favored an Election Day victory by Democrat Hillary Clinton, based on the fact she is a known entity, with a strong government background and known policies. Republican Donald Trump, on the other hand, has an aura of uncertainty, with a volatile personality and changing views on key issues, though some on Wall Street are warming to his tax proposals and economic plan.

Just like the election, Clinton is seen by some strategists as having a slight edge in the debate, but it's really not clear which way it will go. The latest NBC/Wall Street Journal poll gives Clinton a 6 point lead, 43 percent to Trump's 37 percent, among likely voters.

"Stocks usually rally if the incumbent party wins. If Hillary puts Trump away at this debate, you'll see a broad rally in the S&P 500, and my thinking on Trump is if Trump wins, you're going to get a sell-off into the election. It's temporary. There's just so much uncertainty with Trump, people are just going to go to a risk-off scenario," said Daniel Clifton, head of policy research at Strategas.

Since 1992, the has gained an average 0.85 percent on the day after the first major debate between the two key presidential candidates, according to Strategas. The firm's data eliminated an 8.8 percent deline in 2008 since the market was caught up in a heated congressional debate about the "TARP" program to help banks during the peak of the financial crisis.

"I still feel the markets have not priced in a potential Trump victory. I think most people in the market think she's going to win and if you look at the electoral college map, you can still make that case even though it's tightened. I think the market would have to focus on what it means if he were to win," said Greg Valliere, chief global strategist at Horizon Investments. "First and foremost, the market has to care about uncertainty. He changes his positions with regularity."