RPT-Wall St Week Ahead-As U.S. election heats up, investors brace for volatility

 (Repeats with no changes)
    By Lewis Krauskopf
    NEW YORK, Jan 10 (Reuters) - A U.S. stock market that has
weathered trade wars, weak corporate earnings, and now a
U.S.-Iran conflict to continually hit record highs faces a new
obstacle: the 2020 U.S. election season.
    Investors are bracing for more volatility as soon as early
February when Democratic voters in Iowa and New Hampshire kick
off the primary season. Clues about which candidates will have
momentum heading into next month will emerge on Tuesday, when
the Democratic Party holds its next presidential debate.
    Stocks could retreat if a progressive candidate scores a few
early victories or if seemingly more market-friendly moderates,
such as former Vice President Joe Biden, fail to register much
    The market may face political uncertainty for months if it
takes a long time to select the Democratic candidate, who would
then face a hard-fought race against President Donald Trump
before the November election.
    "Investors could potentially sit on the sidelines waiting
for more clarity around the election," said Michael Arone, chief
investment strategist at State Street Global Advisors in Boston.
    "It wouldn't surprise me, especially coming off what has
been a very solid year in markets, for investors to kind of take
a wait-and-see approach," Arone added.
    After gaining about 29% in 2019, the benchmark S&P 500
       has kept pushing higher, minting fresh record highs on
Thursday, as U.S.-Iran tensions appeared to have abated for now.
    Some investors still believe Wall Street is ripe for a
    "The domestic calendar for the primary season is going to be
a source of volatility," said Alicia Levine, chief strategist at
BNY Mellon Investment Management. "I think the market will use
it as an excuse to come in a little bit and take some heat out
of the market and take some of the froth out of the market,
depending on some of these outcomes."
    Levine called the elections a "sleeper issue" because stocks
are pricing in a market-friendly outcome.    
    Investors said they are weighing scenarios that would be
relatively favorable for stocks overall. These include Trump's
reelection and victory by a seemingly moderate Democratic
candidate such as Biden or former New York City Mayor Michael
    But stocks could fall if U.S. senators Bernie Sanders or
Elizabeth Warren, who are seen as more likely to push for
increased regulations in areas such as healthcare and
technology, and for wealth taxes, outperform in the primaries.
    "The more Joe Biden and other moderates are overtaken by the
progressives, I think the market will very gradually begin to
price in more headwinds," said Dave Lafferty, chief market
strategist at Natixis Investment Managers in Boston.
    Shares of healthcare companies were pressured last year by
worries that Warren and Sanders would push through a
government-run Medicare for All. Those fears have eased, but
healthcare is one sector likely to face the election spotlight
this year, along with technology, financials and energy.
    With no strong favorite currently, Trump's Democratic
opponent may not be clear by March 3, when more than a dozen
states vote on Super Tuesday.
    "Uncertainty is never good for the stock market," said Matt
Maley, chief market strategist at Miller Tabak, who added that
following Super Tuesday, "you usually know who the candidates
are going to be and this time around there's a good chance that
you won't."
    Another factor is control of Congress. Trump's Republican
party holds the Senate, while Democrats have a grip on the House
of Representatives - split control that investors say is
relatively market friendly.
    But if there is a Democratic wave in November that also
flips the Senate, stocks could be hit, investors said, as
presidential and congressional control by one party could pave
the way for major policy overhauls.
    "The most violent reaction would be to a progressive
Democrat with the potential for control of Congress," Arone
said. "I give that a low probability, but that's what investors
are most concerned about."

 (Reporting by Lewis Krauskopf; Editing by Richard Chang)