"I'm sure it's going to go just like it did last time — very messy," Lyngen says.
In one dizzying stretch that August, the Dow Jones industrial average dropped 2,000 points in three weeks.
"And don't forget," Lyngen adds, "that ultimately got resolved."
The widespread belief on Wall Street is that Congress and Obama will start negotiations over raising the debt limit and pushing back the fiscal cliff when they return in late November — the so-called lame-duck session, because newly elected members of Congress will not have taken their seats.
Twists in the talks will likely rattle markets as the new year approaches. But if stocks do fall sharply, investors expect that would push Republicans and Democrats to reach a deal.
"Ugly negotiations in the lame-duck session could really throw the market for a loop," says Kleintop. "It could be a painful process for investors."
In a report out this week, analysts at Goldman Sachs tried to estimate just how painful could be. Goldman expects the stock market will start sinking after the elections as people realize the fiscal cliff "will not be solved in a smooth fashion."
That's the reason Goldman forecasts that one broad measure of the stock market, the Standard & Poor's 500 index, will end this year at 1,250 — a 13 percent drop from where it closed Friday.
Beyond that it gets worse with no deal. The $600 billion in cuts and tax hikes kick in and experts say a recession would be likely. That's also why some take solace in the idea that, whatever their political party, nobody wants the economy to shrink.
Dan Greenhaus, chief global strategist at the brokerage BTIG, wonders if that's placing too much faith in Washington. "Republicans aren't losing the House," Greenhaus said. "So as the odds of Obama winning re-election go up, what you have to ask is: How are these two parties going to find middle ground in just a few months? I have no idea."
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