History shows stocks, along with other investments, can perform well with both Democrats and Republicans in charge. No matter what partisans say, it’s impossible to predict which candidate would ultimately end up presiding over higher stock returns.

That doesn’t mean nothing can go wrong—especially in the short term. The VIX, a popular measure of stock market volatility, has averaged around 24 during election months going back to 1992, according to Avantis Investors. It’s currently around 19, more or less in line with its long-term average. But that is much higher than the first half of the year, where it mostly hovered between 12 and 15.

In other words, markets are just as edgy about the election as you are. It’s time to think through some potential outcomes.

What if there is no clear winner?

In a lot of ways, the worst-case scenario—for both the U.S. civic fabric and for markets—is if neither Trump nor Harris scores a clear win. Popular election prediction site 538 puts the chance of an electoral tie at less than one in 100. But the chance the election is decided by recount in the decisive swing state is about eight in 100.

It’s a real possibility, as anyone who lived through the 2000 election should know. If that happens, you should be prepared for a big stock market selloff. The S&P 500 tumbled nearly 8% between election day 2000 and the end of that year.

There is a strong chance the market’s reaction would be even more dramatic in 2024, given former President Trump’s rhetoric and past disregard for democratic norms. Trump recently told supporters he would accept the results of the election, “if I win.” Following similar rhetoric after his 2020 defeat, Trump’s supporters attempted to violently overturn the result.

What can investors do to prepare for potential chaos? It would be foolish to cut back on your stock exposure to protect against a relatively unlikely outcome. But it’s a reminder that a diversified portfolio can help you weather storms. During that same 2000 period, from election day until year-end, bonds returned 3.7% and gold returned 3.1%, helping offset stock losses for investors that owned them.

What if the winner targets stocks you own?

There are plenty of theories about how particular stocks will fare, depending on next month’s outcome. It isn’t hard to see why. The candidates have tried to curry favor with voters by championing or attacking favored industries, and sometimes individual companies.

Vice President Harris has promised to raise the corporate tax rate, a move that could cut into corporate earnings, and Democrats are widely seen as tougher on antitrust issues, a potential hurdle for Wall Street banks looking to capitalize on pent-up M&A activity. Trump, meanwhile, has threatened hefty new tariffs, which could help U.S. manufacturers but hurt multinationals. He’s even threatened individual companies like John Deere over plans to move manufacturing facilities abroad.

The good news? Investors can mostly shrug the campaign rhetoric off and focus on stocks’ fundamentals, according to John Buckingham, editor of the Prudent Speculator newsletter. Deere, along with fellow equipment makers Caterpillar and Eaton all enjoyed market-beating returns during Trump’s initial term, he notes.

Perhaps the most glaring example of markets defying political rhetoric is energy stocks. While Trump ran on a drill-baby-drill platform in 2016, energy stocks posted negative annual returns of more than 15% during the Trump years, Buckingham calculates. Meanwhile, under the more environmentally minded President Biden, the sector has surged nearly 40% a year.

That said, Buckingham warns investors should be cautious with stocks that appear to have already rallied in anticipation of one candidate’s potential win. He points to financial stocks like J.P. Morgan and Goldman Sachs, both up more than 30% in 2024, likely helped by the hope a Trump victory will be a boon for Wall Street dealmaking. If those hopes are dashed “they might have negative reaction,” he says.

What if the winner actually does what they promised?

Another big risk for investors is if either candidate wins big—meaning the president is elected with a solid mandate and the winner’s party takes both houses of Congress. What’s often best for investors is for Washington to simply get out of the way, and the let the market do its thing.

Both candidates have big plans—not all of which would help the economy, according to most economists. Trump has proposed hefty new tariffs, while Harris has floated the idea of a tax on unrealized capital gains. Both candidates’ platforms would add trillions to national debt, with Harris’ plans estimated to cost $3.5 trillion and Trump’s $7.5 trillion, or more than twice that.

Winning both the White House and Congress would make it far more likely either candidate could implement politically popular but economically dubious measures. There are suggestions markets are already starting to react to the possibility. As Trump’s election chances have crept up, so have bond yields and a widely held explanation is that bond investors worry his lavish spending plans will lead to another serious bout of U.S. inflation.

Those inflation worries could be another reason to add a small amount of gold to your portfolio—advisors typically recommend no more than 15%—or a broad-based commodity fund such as the Pimco Inflation Response Multi-Asset or DWS RREEF Real Assets, both of which Barron’s has previously recommended.

When it comes to bonds, Treasury inflation-protected securities are an option, although a better bet may be to keep your faith in stocks. In recent weeks, a number of high-profile commentators, including strategists at Goldman Sachs, have warned stocks face a lost decade as a result of high valuations and market concentration. If inflation crimps bond returns, investors may nonetheless be glad to own them, since in the long run corporate profits tend to keep pace with prices.

“One of the most tried-and-true ways of beating inflation over the long term is to own a healthy dose of high-quality stocks,” says Oakland, N.J., financial advisor Greg Giardino.

Write to Ian Salisbury at ian.salisbury@barrons.com