One of the biggest misconceptions about the presidential election cycle is the focus on the stock market results during the presidential terms of each party. Most of the impact of a new president occurs in the months leading up to the election. In this regard, President Obama is given glowing views by the stock market gains during his two terms, but the market collapsed leading up to his election and inauguration. The prime question is whether Obama caused the tail end of the financial collapse or helped the markets rally. As this chart from TradingView.com shows, the last two recessions occurred during the Presidential election. Both occurred after massive gains in assets that required corrections and the combination of new political leaders never helps the financial landscape. The market hates the uncertainty such as whether a Democrat in the While House would help bail out the banks and auto manufacturers during the Great Recession. In this regard, the views of whether a Democrat or Republican is in the White House is valid from the point of starting a term, but the view is highly incomplete without incorporating the gains or losses based on the expected election and excluding the last few months of a term. Now, the market faces a similar scenario of a President ending 8 years in office and a bull market. In this case, Hillary Clinton is expected to win and mostly carry the policies over from the previous President. The fears of policy change that typically comes with a new party taking over is unlikely to occur unless Trump is able to secure a surprise victory. Regardless, the 8th year of a Presidential term is typically negative (via Business Insider) party due to the stock market not liking uncertainty. The impact of a Clinton victory is probably most visible in the chart of the iShares Biotech ETF (IBB). Constant shots at drug pricing hit the index over the last year as the polls increasingly showed the likelihood of a Clinton victory. The index likely catches fire as Clinton becomes the winner and reduces demands on the biotech sector to cut drug pricing. The big unknown is what happens to the market if Trump makes a surprise victory. The stock market would undoubtedly turn highly volatile on a surprise win, but most stocks are too reasonably priced to support any major crash like during 2000 and 2008. The only major caveat is that if a crisis does emerge, investors need to keep in mind that the combination of a new President like Trump and a crisis could quickly turn into another disaster for the markets. Otherwise, Trump isn't likely to have the authority to implement most of his outlandish plans likely limiting the impact on markets. The key to understand is that the markets such as biotech have already felt the impact of a Clinton victory with biggest concern coming under a Trump surprise victory. Disclosure: No position