UK domestic shares, gilts and sterling would all suffer if Jeremy Corbyn becomes prime minister, according to several fund managers.
David Coombs, head of multi-asset investing at Rathbones, said: "The potential effects are worrisome enough to keep this risk high up in investors' minds. A failure over the Brexit negotiations seems the most likely spark for this tinderbox.
"If Mr Corbyn were to become prime minister, we believe gilt yields would rise and sterling would fall dramatically as foreign investors may abandon UK assets wholesale.
"Domestic equities would be hit hard, both by rising import costs and a fall in businesses' appetite to invest (hitting economic growth). The ultimate result could be stagflation. If an election were called, we would avoid UK assets with extreme prejudice."
If Mr Coombs analysis were to prove correct, the yield on UK government bonds (gilts) would rise as investors sold them.
A fall in the value of sterling would mean the spending power of the yield on the bonds would fall for overseas investors, and cause them to sell existing bonds, to reinvest the capital into the bonds of countries with stable currencies, in order that the income they receive holds its value.
Richard Buxton, chief executive of Old Mutual Global Investors and manager of the £2.3bn Old Mutual UK Alpha fund, said the market is underestimating the chances of Mr Corbyn becoming prime minister.
Mr Buxton said: "Capitalism is not working for young people and if capitalism is not working for people then they will vote for something else.
"The market is not pricing this potential right now."
He said were Mr Corbyn to become prime minister, he would expect domestic shares to suffer and those companies with overseas earnings to perform better as sterling weakens.
Mr Corbyn's Labour Party have signaled they may end private finance initiative (PFI) contracts, which would be negative for some infrastructure funds.
David Scott, adviser at Andrews Gynne in Leeds, noted that some of the biggest infrastructure investment trusts on the UK market have been reducing their exposure to the UK PFI market over the past year.
Jason Hollands, managing director for business development and communications at Tilney, said the renewable energy sector might be a beneficiary of Mr Corbyn if he got into power, as he was likely to be committed to subsidies for the sector.