Imagine knowing with absolute certainty that China will invade Taiwan within five years. No debate. No ambiguity. Just pure fact. Now imagine you don’t know exactly when it will happen or how ugly it gets. Could be a full military assault or a blockade. Could last weeks or drag on for years. Either way, it will shake the global economy to its core.
Now the question becomes, how do you structure your portfolio around that certainty?
First, this scenario rewires the entire semiconductor supply chain. Taiwan controls over 60% of global foundry capacity and more than 90% of advanced chip production through TSMC. A blockade or attack would strangle the chip supply, and by extension, hit every AI play tied to hardware. NVIDIA, AMD, and even Apple would feel the heat. TSM itself would be ground zero.
That means dumping or heavily reducing exposure to high-multiple chipmakers and AI hardware plays. The market will not wait for clarity if tanks roll or a blockade is broadcast. Even if chip factories are untouched, insurance, logistics, and national security restrictions will choke exports.
The second impact hits the defense complex. In a high-certainty scenario like this, the defense sector isn’t just a hedge. It becomes a core play. Companies like Lockheed, Northrop, RTX, and General Dynamics stand to benefit from soaring government contracts. Budget increases would be bipartisan and massive. Expect multi-year backlogs for everything from drones to missile systems.
Third, gold. Yes, the cliché play, but for good reason. Geopolitical shock tied to a major military action in the Pacific will hammer risk assets, especially tech and EM equities. Real rates would swing, and global capital would flood into hard assets. Not just gold, either. Silver, uranium, oil all become strategic. Inflation hedges return fast. And you’re not holding gold for yield here. You’re holding it for liquidity and global panic insurance.
You also want to think supply chains. This scenario resets the calculus on where the world sources everything from microchips to rare earths. That means watching industrial reshoring ETFs like IRBO, or commodity-heavy indexes that benefit from domestic ramp-ups in mining, materials, and manufacturing.
There’s also the macro wildcard. Bonds could spike short term in a flight to safety, but if escalation drives inflation or supply disruption, long yields could bounce. That’s a hard one to time. Better to stay nimble than marry duration.
Social media chatter around this topic has picked up in the last two months, especially after multiple US officials visited Taipei and Beijing warned of retaliation. The most common discussions are still speculative, but some are already eyeing defense and energy. Institutional players won’t broadcast these bets, but you can already see call volume rising in major defense names.
Tradable levels are tricky with a five-year horizon. Many stocks will price in risk gradually. The initial shock would be violent though. You’d want to be positioned well before signs of movement. Think before headlines.
Finally, don’t overlook the dollar. In chaos, capital still runs to the US first. DXY strength would hammer EM currencies. That’s another reason to avoid EM equities and lean into dollar strength through either UUP or direct forex exposure.
You don’t hedge this kind of event by reacting to it. You hedge it by being early and precise. This isn’t a scenario to play hero in the middle of. If you knew it was coming, your job would be to quietly build a moat while everyone else laughs it off.