Possible scenario
Operational Friction Rises
20% Chance
A more adverse scenario is that China moves quickly from construction to visible testing, prompting closer U.S. and allied naval shadowing. The risk is not full conflict, but more encounters around Taiwan, the Luzon Strait, or the South China Sea that briefly lift volatility.
Initial impacts
- Market volatility Up
- Riskier companies' borrowing costs Up
- 10-year Treasury yield Down
- Oil prices Up
- US dollar Up
Secondary impacts
- Industrials +1.5%
Portfolio impact
S&P 500-0.4%
Each figure is the modeled move of the S&P 500 if the outcome occurs. For information only. Not investment advice.
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