Possible scenario
Diplomatic Retaliation Cycle
30% Chance
China responds to U.S. refusal to halt Taiwan arms sales with diplomatic and administrative retaliation rather than immediate military action. Beijing uses sanctions, canceled talks, cyber warnings, and pressure on Taiwan-linked firms to raise costs before any direct confrontation.
Initial impacts
- Market volatility Up
- Riskier companies' borrowing costs Up
- 10-year Treasury yield Down
- US dollar Up
Secondary impacts
- Technology -1.5%
- Industrials -0.6%
Portfolio impact
S&P 500-1.0%
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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