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Super Tuesday Is Coming. What Wall Street Should Expect.

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Photograph by Brendan Smialowski/AFP via Getty Images

Super Tuesday is coming on March 4—the day that 14 state primaries, and the American Samoa caucuses, are held—and it could go a long way to deciding the ultimate Democratic presidential candidate.

Investors might need to prepare to “feel the Bern” in their portfolios. Sen. Bernie Sanders (Ind., Vt.) is likely to be the big winner coming out of Super Tuesday—and some on Wall Street believe that would roil stock markets.

Sanders is the clear front-runner. He should exit Super Tuesday with more than 400 delegates, according to polling data, almost twice as many as former Vice President Joe Biden. About a third of total Democratic delegates are up for grabs on Super Tuesday.

There are 3,979 Democratic delegates in 2020. It will take 1,991 to win the nomination for president on first ballot. (The 765 superdelegates don’t participate in the nominating process on the first ballot.)

Sanders’ momentum is significant because he has a seven-percentage-point lead over President Donald Trump in a head-to-head general election matchup, according to Real Clear Politics, a polling-data aggregation site. Polling results are fluid, and it’s early in the election cycle, but Sanders—along with Biden—has been the Democratic contender with the most consistent polling advantage over the incumbent.

The market, to some extent, fears a Sanders administration. Goldman Sachs recently recommended that clients buy put options on defense stocks to protect against volatility and declines in the sector as Sanders strengthens. He is likely to cut military spending, which has increased under Trump. And his rhetoric has been harsh on markets and corporations in general.

“Sanders’ momentum on the Democratic side is a source of market concern,” Barry Bannister, head of institutional equity strategy at Stifel, tells Barron’s. He argues that the market would look unfavorably on the prospect for increased government spending and higher marginal tax rates.

Not everyone, however, believes the current polling data will play out in November. “Many clients have expressed the view that President Trump would be a large favorite in such a contest,” wrote Goldman analyst Ben Snider in a recent research report. He points to Trump’s net approval rating, which has improved in recent weeks, as well as the fact that health-care stocks have performed relatively well despite Sanders’ surge.

Sanders wants to create a national single-payer health-care system, most often referred to as Medicare for All.

“With six or more viable Democrats in the race, calling a front-runner or predicting a winner seems premature,” wrote Morgan Stanley Wealth Management investment strategist Scott Helfstein in a recent research report. He might be correct, but investors still need to be vigilant. The stock market, according to Helfstein’s calculations, tends to be more volatile in primary months. What’s more, returns are weaker then.

The S&P 500 generates stronger returns as “candidate uncertainty” declines.

There is, however, one reason not to completely overreact to any Super Tuesday outcome: gridlock. J.P. Morgan economist Jesse Edgarton put the odds of a Democratic sweep in November at just 5%. Without controlling the House, Senate, and the White House, implementing progressive policies, like the ones favored by Sanders, will be very difficult.

Write to Al Root at allen.root@dowjones.com