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The Best ETFs to Ride Europe’s Defense Boom After Trump-Zelensky Fallout
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The Best ETFs to Ride Europe’s Defense Boom After Trump-Zelensky Fallout

Alvin Chow's avatar
Alvin Chow
Mar 03, 2025
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The Best ETFs to Ride Europe’s Defense Boom After Trump-Zelensky Fallout
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A recent meeting at the White House between President Trump and President Zelenskyy escalated into a heated exchange, highlighting differing perspectives on the ongoing conflict in Ukraine. The incident divided the internet as well. Regardless of the view, the confrontation underscored a potential rift in Western unity regarding support for Ukraine.

One clear takeaway is that Trump refused to directly involve U.S. troops in the war, as such a move could escalate into World War III. Without U.S. support, Russia may feel emboldened to attack Ukraine more aggressively, or Ukraine may lose leverage in negotiations. Essentially, a lot of uncertainties have now been thrown into the air.

In the aftermath of the White House incident, European leaders have demonstrated a unified stance in supporting Ukraine, recognizing the precarious situation and the urgency of action. The summit in London, hosted by UK Prime Minister Keir Starmer, focused on increasing defense spending, providing military assistance to Ukraine, and exploring diplomatic avenues for peace. Key outcomes from the summit include:

  • Increased Defense Budgets: Several European nations pledged to boost their defense expenditures to meet or exceed the NATO guideline of 2% of GDP. The UK, for instance, committed to raising its defense spending to 2.5% of GDP by 2027.

  • Military Support for Ukraine: The UK announced a £1.6 billion export finance contract to supply Ukraine with air defense missiles, reinforcing Europe's commitment to enhancing Ukraine's defensive capabilities.

  • Pursuit of a Peace Plan: European leaders are formulating a peace proposal to present to the U.S., aiming to secure a sustainable resolution to the conflict while ensuring Ukraine's sovereignty and security.

The commitment to increased defense spending and military support for Ukraine suggests a favorable environment for European defense contractors, even if American support wanes. Investors may find opportunities in companies likely to benefit from heightened defense budgets.

In fact, many of the notable European defense companies have seen their share prices rally over the past year:

  • Rheinmetall AG (Germany) +134%: A key supplier of military vehicles, weapons, and ammunition.

  • Leonardo S.p.A. (Italy) +88%: Specializes in aerospace, defense, and security solutions.

  • Saab AB (Sweden) +50%: Known for its aerospace and defense technology, including fighter aircraft and radar systems.

  • Thales Group (France) +39%: A multinational company providing advanced defense electronics and systems.

  • BAE Systems (UK) +11%: A leading defense contractor specializing in aerospace and security systems.

Global investors outside of Europe may be less familiar with these companies, making direct investments less prudent. This is where Exchange-Traded Funds (ETFs) come into play. Two ETFs stand out for consideration:

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