FOLLOW THE MONEY

Is the End of the Ukraine War Near?

I read an article titled “Follow the Money - Markets Say Ukraine War is Nearing the End” by Djoormart Otorbauve, Former Prime Minister of the Kyrgyz Republic. It is well-worth reading. You can find it on LinkedIn.

The Prime Minister’s thesis is:

“Follow the money. This old Wall Street maxim is now the most accurate political forecast of the moment. The market is signalling—loudly—that the end of the war in Ukraine is approaching.” The Prime Minister goes on the explain that the price delcines of European defense stocks are signaling the Ukraine War is nearing the end due to Trump’s peace push. And for the most part, I agree with the Prime Minister’s assessment but may be overstated and incomplete.

Yes, there was a real sell-off in European defense shares in late 2025 (November into early December), triggered by headlines around Trump’s aggressive diplomacy and that leaked 28-point peace plan draft. Stocks like Rheinmetall dropped around 20-28% from early October peaks (it hit over €2,000 then fell to the mid-€1,400s before rebounding a bit), RENK plunged over 40% from its high (down to the €40s-€50s), HENSOLDT similarly tanked from €110+ to the €60s-€70s, and others like Thales, Leonardo, Saab, and BAE followed suit with double-digit losses. The broader STOXX Europe Aerospace & Defense sector did slide significantly in that period, more than U.S. peers.

The contrast with American giants holds up too: Lockheed Martin, Northrop Grumman, and RTX saw milder dips (around 10-13% or less in spots), since they’re less tied to Ukraine-specific “consumables” (ammo, shells, vehicles) and more to long-term U.S. programs like F-35s, missile defense, and Indo-Pacific focus. European firms had baked in a huge “war premium” after massive gains (Rheinmetall up 400%+ since 2022), so when peace talks heated up—especially that 28-point plan floating territorial concessions, military caps for Ukraine, and no NATO—investors panicked and derated the sector fast.

Here is where the author misses key points and why I wouldn’t bet the farm on his “markets price peace” conclusion:

1. The drops were exaggerated by overvaluation and profit-taking: These stocks were insanely stretched—trading at premiums assuming endless war and exploding European budgets. Analysts (like Citi, Morningstar) noted valuations required unrealistic profit growth. Much of the fall was correction, not pure “peace pricing.” Some called it a “false peace signal.”

2. Structural tailwinds remain strong: Europe is committed to rearmament regardless of Ukraine’s outcome—NATO targets, fears of Russian aggression, and decoupling from U.S. reliance under Trump. Budgets are rising (e.g., Germany’s massive packages, EU joint borrowing ideas). Long-term demand for replenishment and modernization isn’t vanishing. Analysts say the sector’s underpinned by this, not just short-term Ukraine aid.

3. Peace isn’t imminent or guaranteed: That 28-point plan (with big concessions to Russia, security guarantees for Ukraine, but monitored by a Trump-led council) is controversial—Ukraine’s resisting parts, Europe’s feeling sidelined, and Russia’s playing hardball. Talks are ongoing, but no breakthrough yet. Markets overreact to headlines; we’ve seen similar dips before on rumor spikes.

4. U.S. stocks aren’t immune long-term: If peace sticks, global demand softens a bit, but U.S. firms are diversified. Still, no big panic there.

Takeaways for you:

Markets are a useful sentiment gauge—better than politicians’ talk sometimes—but they’re volatile and often wrong on timing geopolitics. This post highlights a real shift toward diplomacy under Trump, which could de-escalate Ukraine (conservative win, in my view—endless wars drain us). Watch defense stocks as indicators, but don’t sell European ones in panic; they could rebound on sustained spending. For investments, I’d lean on U.S. names for stability, but European ones might be buys on weakness if you’re bullish on NATO buildup.

Gerry Parran regularly write on negotiating and geopolitics.

This article was written with the assistance of AI tools to support the research and editing process.