Investors are bracing for a rocky campaign season that’s poised to weigh on markets just as they approach pre-pandemic highs.

What’s happening: As the Democratic National Convention kicks off, Wall Street strategists generally agree that the health of the economy, the path the pandemic takes and the viability of a vaccine are most significant to the trajectory of markets.

But they’re still getting peppered with questions from clients about the impact of the race between former Vice President Joe Biden and President Donald Trump, and many see the election as a key risk to the outlook.

“The US elections will likely be associated with a spike in volatility, as there is still a lot of uncertainty regarding the turn in fiscal, tax and trade policies contingent on the outcome of the election and its impact on asset prices,” Bank of America’s Claudio Irigoyen and David Hauner said in a recent research note.

The scene

Prediction markets, which are used to place low-stakes bets on the outcomes of political events, have been assigning better odds to a Biden victory.

However, Biden’s lead over Trump among registered voters has significantly narrowed since June, according to a new CNN poll conducted by SSRS. Overall, 50% of registered voters back Biden, while 46% say they support Trump, right at the poll’s margin of error. Some other national polls released on Monday, including one from ABC News and the Washington Post, show Biden with a significant lead.

For now, Wall Street strategists are prepping clients for a wide range of possible outcomes.

“All Trump/Biden scenarios are on the table,” Wells Fargo analyst Christopher Harvey said in a recent research note. That includes an Electoral College landslide in either direction and a “Bush/Gore-style squeaker,” a reference to the too-close-to-call election in 2000.

That’s not all: “We cannot rule out the possibility that one (or both) of the candidates tests Covid-positive before Election Day,” Harvey added.

What it means

History suggests that stock market returns are muted heading into a US presidential election and get a bounce once results become clear, per Harvey, who analyzed S&P 500 returns around the last 23 US races. There’s no reason to think the trend won’t hold this year.

A lack of certainty in November due to pandemic-related logistics could deal a blow, however. In 2000, the market dropped 9% as the fight over Florida’s hanging chads went to the courts, Harvey noted.

Permanent business closures aren’t a big problem … yet

A string of high-profile bankruptcies and the shuttered stores lining city streets make clear that the economic scars of the pandemic will linger for years to come.

But American businesses have been “surprisingly resilient,” according to new research from strategists at Goldman Sachs.

The backdrop: Thanks in large part to substantial support from the government, including funding from the Paycheck Protection Program, only 6% of small businesses remained closed in July. That’s down from a quarter in April.

That 6% still has a sizable economic impact, accounting for almost 3 million jobs. However, there’s evidence that many of those firms still see their shutdowns as temporary.

The monthly pace of permanent business closures on Yelp slowed through June, according to Goldman Sachs, and most small businesses report they can avoid shutting down for good for at least six more months.

Large companies have been less able to withstand the shock, with bankruptcies rising close to the peak hit during the recession following the 2008 financial crisis. This could drag down job growth by 94,000 positions per month, the investment bank estimates.

The upside: Goldman Sachs notes that most bankruptcies this year come from firms that were headed toward insolvency even before the pandemic, while “otherwise healthy” companies have been spared.

The situation could deteriorate through the end of the year. “Closures will likely rise in the coming months as business support runs out while the economy is still weak,” Goldman’s strategists said.