Nikkei and S&P 500 would tumble if Trump wins election, analyst says

Despite the small lead for Hillary Clinton heading into the US presidential elections, her victory was already "heavily discounted" meaning that global capital markets would react far less than if her rival, Donald Trump, were to finally come out on top, a top think-tank said.

According to John Higgins, chief markets economist at Capital Economics, if Trump won that would see the US dollar move "sharply" lower against the other major currencies, especially the Swiss franc and Japanese yen.

In parallel, the S&P 500 would likely drop below the 2,000 point mark, although many other stock market indices would fare much worse.

Strength in the Japanese yen, for one, could knock the Nikkei-225 below the 15,000 point mark, versus its current levels above 17,000.

"And there would probably a broad-based rout in emerging markets," Higgins said.

Despite Trump's talk of defaulting on the national debt, fiscal plans that include unfunded tax cuts and proposals for trade tariffs, the resulting safe-haven bid after a Trump win would likely see US Treasuries soar, possibly pushing their yield from 1.8% to 1.5%.

Nonetheless, the full impact of the presidential contest could be diluted or amplified depending on the outcome of the elections in the Senate and House of Representatives, Higgins said.

"Second, if the result is extremely close and contested, uncertainty could still weigh on the markets, as was the case in 2000."

As far as the commodities space is concerned, crude futures could drop to roughly $40 a barrel while gold futures would likely rocket to at least $1,400/oz..