If you’re wondering about mispriced risk in equities, it’s worth asking how stocks might react in the event markets are subjected to another disputed presidential election in America.

In October of 2020, some Wall Street strategists fretted that a prolonged process whereby markets wouldn’t know who won the election for weeks might undercut sentiment and stoke volatility. But no one that I’m aware of wrote openly about the risk of post-election violence, let alone an “unthinkable” scenario in which the incumbent refused to leave office.

It goes without saying that Donald Trump, should he lose in November, will claim the election was fraudulent. It also goes without saying that the vast majority of his supporters will believe him. The only question is what lengths they’re willing to go to when it comes to adjudicating claims. A Trump victory would be a Pandora’s box all its own.

I wouldn’t expect Wall Street to “go there,” so to speak, when it comes to election scenarios. I will, though. In brief now, and in detail the closer we get to Election Day. There are three tail risks, in my view:

1. “January 6 redux” in a Trump loss
2. “Contained civil war” in a Trump loss
3. “Hungary” in a Trump win

Concerned as I am, I don’t think there’s any possibility of a “full-blown” civil war scenario. Americans are too lazy and apathetic.

(1) looks like January 6, 2021, except in state capitals and municipal buildings all around the country. It ends within a few days.

(2) would be that, plus one or more states refusing to recognize the election as legitimate, raising the specter, however ridiculous, of secession. It ends within a few weeks.

(3) would entail Republicans running the Fidesz playbook in a Trump presidency. It lasts for four years and potentially longer in the event the GOP manages to suspend presidential term limits.

The third’s the most dangerous from a long-term perspective. It’d jeopardize American exceptionalism to the core, calling into question key pillars of the investment case for Treasurys and posing a very real threat to the dollar’s reserve currency status.

There’s a fourth tail risk: A disputed election that’s decided by the courts. Wall Street is willing to discuss that using polite euphemisms like those employed by Goldman’s David Kostin in his latest. “Risks that equity investors are not pricing include a prolonged election process,” Kostin said, adding that it’s not so much about “who” but rather “when.”

“In 1876, it took 115 days until Rutherford B. Hayes was declared the winner,” Kostin remarked, before reminding the youngest of his clients and colleagues that 2020 wasn’t the only recent example of acute post-election indeterminacy: “In 2000, it took 34 days until the Supreme Court halted the Florida recount and effectively declared George W. Bush the winner.”

As the figure shows, the volatility market isn’t yet pricing the risk of a hung jury. (There’s a kink in October, but that’s it.)

Kostin didn’t have much else to offer, and although Goldman’s political economists have penned a few longer notes, none of them deal extensively with the risks mentioned above. Because they can’t. I’m not sure how Wall Street’s sales desks intend to deal with client questions about hedging tail outcomes in November, but on the research side, except crickets.

For whatever it’s worth, Kostin added that “the polling margin in the ‘tipping point’ state that provides the potential 270th electoral vote is one of the most important election metrics to watch [and] while Biden has drawn nearly even in national polling, he trails by 2 percentage points in the tipping-point state and by 4 pp when averaging all 7 swing states.”