Productive Assets Hedge Geopolitical War Risks Better Than Cash

Holding cash during a global conflict reduces an investor's purchasing power as inflation rises. Government spending and supply chain disruptions typical of war drive prices higher, turning a currency that is losing value into a financial drain rather than a safe haven. Warren Buffett argues that productive assets—stocks, real estate, and farmland—are more effective hedges because they generate tangible returns that rise with inflation. The S&P/TSX Composite Index, for example, gained roughly 29% in 2025 despite tariff threats and geopolitical uncertainty. This outperformance is partly due to the index's composition, which is dominated by financials (32%), materials (17%), and energy (15%). These sectors often benefit from the commodity price spikes that accompany global crises. In late March 2026, Suncor and Canadian Natural Resources each rose more than 2% when Middle East tensions pushed oil prices higher, even as the broader TSX dipped. The S&P/TSX Composite Index gained roughly 29% in 2025.