Julian Emanuel, equity and derivative strategist at UBS, said contentious elections — especially when there's a third-party candidate — have historically been a recipe for a wobbly stock market.
"When the election is as contentious as this one has been with so much back and forth, and the prevalence of the third-party candidate, what our work has shown is the market has tended to trade very indecisively the month before and several months after," he said.
This year, Gary Johnson is running as the Libertarian party nominee and he is seen as having 5 percent of the popular vote, according to FiveThirtyEight.com.
The market Monday continued to digest Friday's news of further investigation into Democrat Hillary Clinton's email issues by the FBI. Clinton continues to hold a lead over Trump, but some stock strategists said there is a cloud over her that could impact her effectiveness if she becomes president.
The latest NBC/Survey Monkey poll showed no change in Hillary Clinton's six-point national lead over Republican Donald Trump, after the latest revelations about the FBI investigation.
"The fact [stocks are] holding up here in the face of this suggests the uncertainty out there, and we're going to have to wait until we get closer to Election Day. It's impossible to know. My gut is ... it's pretty close," said Bruce Bittles, Baird chief investment strategist.
Daniel Clifton, chief policy strategist at Strategas, said the fallout from news of the latest investigation into Clinton may be that Democrats don't do as well as they might have in down-ballot races.
Wall Street has viewed Clinton as a favorite and was comfortable with a Democratic White House if Congress remains in Republican hands, a recipe for gridlock. Trump is seen as more of an unknown, although his tax proposals are more appealing to market participants.
Clifton said one metric he follows has turned out to be a potential positive for Donald Trump, if history is a guide. The market is down 2.5 percent since Aug. 8 and unless it reverses course by Election Day, it could be a bad omen for Clinton. Going back to 1984, the incumbent party has never won the White House when the market has performed negatively, he said.
While he still believes Clinton could win, the race is closer. "I think the market is telling you, it's not someone that's going to have a blowout win," Clifton said. He did say the market often has a relief rally in the days ahead of the election.
Sam Stovall, chief investment strategist at CFRA, believes themarket behavior already is a bad omen for Clinton. He looked at the time frame of July 31 to Oct. 31 during election years, going back to World War II. This year, the S&P 500 was down 2.2 percent in that time frame, and there's only been one other election in 1956, when an incumbent was re-elected with the market down in that three-month period.
Stovall said when the market has been higher in that same time frame, the incumbent party was re-elected 82 percent of the time going back to World War II. One of those times was 1968, when George Wallace ran as a third party and the other was in 1980, when John Anderson was running as a third party.
Emanuel said he still expects the market to end at his target of 2,175 this year for the S&P 500. Earnings for the third quarter are growing at a rate of 3.1 percent, when they were originally expected to decline, according to Thomson Reuters. More than 70 percent of companies beat earnings estimates so far this quarter.
"What really matters are the economy and earnings," said Emanuel. "Earnings are coming in better than expected and the economy feels solid.… We think that 2.4 percent growth looks doable next year." He said the Fed should confirm that by hiking rates in December and because growth is improving, the hike should be looked at positively.
Emanuel said uncertainty could linger even after the polls are closed but ultimately the market could take off. "The traditional fourth quarter rally may occur at a later date rather than right after the election," he said.
CORRECTION: This story was updated to show the S&P 500 was flat on Monday.