Donald Trump's odds are narrowing and markets are bracing for Brexit 2.0.
As the Republican presidential candidate pulls even with Hillary Clinton in the polls following the FBI's email probe bombshell, financial markets around the world are seeing heavy selling.
The Vix index - commonly referred to as Wall Street's "fear gauge", which measures expectations of stock market volatility, has risen to its highest level since the UK's Brexit vote, the Financial Times reported. Meanwhile, gold spiked overnight, and the Mexican peso plunged.
"With the Brexit trading experience in recent memory, it seems that some traders don't want to be caught off side again and have started to act," CMC Markets chief market strategist Colin Cieszynski told FT.
AMP Capital chief economist Dr Shane Oliver, while arguing the best outcome for shares would be a Clinton victory but with Republicans controlling the House, has warned against "making too much of the US election".
"Around the Brexit vote there was much concern a Yes vote would be a disaster for shares and the global economy," he said in a client note. "In the event there was an initial kneejerk sell-off but after a few days global markets moved on to focus on other things."
Dr Oliver said a Trump win would trigger an initial bout of "risk off" with shares in the US and globally falling by 5-10 per cent, and safe havens like bonds and the US dollar rallying as investors worry about his protectionist policies triggering a "global trade war".
"A Trump victory to the extent that it leads to falls in investment markets and worries about a global trade war may also increase the chance of another RBA rate cut in Australia," he said.
A Clinton victory, on the other hand, would "likely also trigger a bout of nervousness in US shares as it would be easier for Clinton to implement less business friendly tax and regulatory policies that would weigh on US health, energy and financial stocks".
"This would likely be more focused on US shares though with less of an impact on global Australian shares," Dr Oliver said.
"The best outcome for shares would be a Clinton victory but with Republicans retaining control of at least the House as this would be seen as 'more of the same'."
The Australian share market fell on Wednesday, following the lead Europe and the US, which sold off heavily following the release of a Washington Post-ABC News tracking poll putting Trump one point nationally ahead of Clinton.
On Wall Street, the S&P 500 lost 0.7 per cent to close at a four-month low, while the Dow Jones industrial average fell 0.6 per cent. European shares fell for a seventh straight day.
In Australia, the S&P/ASX 200 index was down 0.8 per cent at midday, with financial and energy stocks the worst performers. "We are seeing a huge portfolio shift by money managers, with a lot of them moving to cash in order to ride out the uncertainty," IG's chief market strategist Chris Weston told AAP.
"There are increasing concerns that Donald Trump has a realistic shot at the US presidency, which wasn't the case a week ago."
Nicholas Colas, chief market strategist at Convergex, told FT markets were "now going to have to recalibrate for a coin toss outcome versus what they thought was a sure thing". "That will happen headline by headline and tick by tick until next Tuesday," he said.
In a research paper released on Wednesday, ANZ chief economist Richard Yetsenga said the two of the biggest political events of 2016, Brexit and the ascent of Trump, had rendered sophisticated prediction models "only as good as a coin toss".
Yetsenga argued rather than a backlash against globalisation, it was social media that was "opening pathways to previously unthinkable outcomes".
"While betting markets may have inaccurately pegged the likelihood of Brexit or the rise of Donald Trump, these events were not unpredictable," he said.
"Predictions based on social media were more accurate. Twitter data gathered by TickerTags, a social media analytics tool, found that a 'Leave' vote was the most likely outcome of Britain's EU Referendum before polls closed."