TRADITION suggests that Wall Street should favour the Republican Party. America’s conservatives usually back low taxes, free trade and a reduction in regulation. But the 2016 election seems to be an exception. A Bank of America Merrill Lynch poll of fund managers in October found that a Republican victory was seen as one of the biggest risks facing financial markets, along with the disintegration of the EU.

A study* by Justin Wolfers of the University of Michigan and Eric Zitzewitz of Dartmouth College found that in the wake of the first debate, there was a six-percentage-point rise in the probability of a Hillary Clinton victory on betting markets. In reaction, stockmarkets rose, and gold and Treasury bonds (two assets that benefit when investors become risk-averse) fell. “Financial markets expect a generally healthier domestic and international economy under a President Clinton than under a President Trump,” the authors concluded.

What makes this election different for investors is the nature of the Republican candidate—Donald Trump is a long way from the party’s mainstream. A Trump victory would throw up all kinds of uncertainty about the likely tone of economic and foreign policy. It is not just that the candidate’s pronouncements have been vague and inconsistent; he has not surrounded himself with the kind of mainstream policy advisers that backed past candidates such as Mitt Romney or John McCain. “This will be totally uncharted territory,” says Mitchell Harris, chief executive of the investment-management arm of BNY Mellon.

A range of issues causes investors concern. On trade, Mr Trump’s threats to tear up the North American Free Trade Agreement and to take a more aggressive line with China risk economic disruption, as does his policy on the deportation of illegal immigrants. Then there is his desire to walk away from (or at least renegotiate) some of America’s defence alliances—an approach that would heighten geopolitical risk. Another worry is his attitude towards Janet Yellen, the chairwoman of the Federal Reserve. Mr Trump has said that Ms Yellen should be “ashamed” of her low-rate policy, implying he would appoint a more hawkish candidate when her term expires in January 2018, or perhaps even earlier. Investors would welcome neither aggressive Fed tightening nor any sense that central-bank independence was under threat. All of these factors would affect global, not just American, financial markets.

The risks are not all on the Trump side. A Democratic sweep in which the party controlled the White House, Senate and the House of Representatives would also be seen as a negative for the markets. It would strengthen the hands of those on the left of the party, such as Bernie Sanders and Elizabeth Warren, who would promote higher taxes and greater regulation.

The least worst result, from a market point of view, would be a win by Mrs Clinton, with the Republicans still controlling the House. Kate Moore of BlackRock, a fund-management group, says that a split government is seen as good for business. Such an outcome might even result in a modest fiscal stimulus, something that the markets would welcome.

As Michael Zezas, an analyst at Morgan Stanley, points out, the candidates have some common ground on corporate taxation—favouring proposals designed to make companies repatriate overseas earnings and to limit the tax deductibility of interest payments, for example. That suggests it might be possible for President Clinton to do a deal with House Republicans, trading lower tax rates for the elimination of deductions. When she was a senator, Mrs Clinton was seen as someone who was willing to co-operate with the opposing party.

A final oddity of this election is that Mr Trump is seen as a populist champion for the common man, even though he plans to cut taxes for the rich and raise prices for the poor (assuming he pushes through tariffs on goods from China, as he has threatened). In contrast, Mrs Clinton has been painted as the Wall Street candidate even though she plans to raise the top rate of income tax and tighten the tax treatment of capital gains. In many ways, indeed, her agenda resembles that of a traditional Democrat. That makes it all the more telling that the financial markets have so little enthusiasm for a Trump victory. This is a an electoral choice investors would rather not have to make.

Economist.com/blogs/buttonwood

*What do financial markets think of the 2016 election? https://www.brookings.edu/research/what-do-financial-markets-think-of-the-2016-election/