The effects of the 2024 U.S. presidential election and the 2025 Trump–Zelenskyy meeting on European defence stocks: an event study analysis

Abstract

This study examines the impact of two recent political events – the U.S. presidential election result of November 2024 and the Donald Trump–Volodymyr Zelenskyy meeting of February 2025 – on the European defence sector. Using event study methodology and the constituent stocks of a recently launched European defence exchange-traded fund (ETF), we find significant positive abnormal returns both before and after these events. Notably, cumulative average abnormal returns (CAARs) reached 5%–6% over the four trading days immediately following the election result announcement and 16%–18% over the same window after the Trump–Zelenskyy meeting. The results suggest that both events sent strong signals to market participants about potential increases in European defence firms’ revenues. These signals may arise from increased market expectations of European countries’ defence spending, triggered by the abrupt changes in U.S. foreign policy indicated by these events. Our findings have important implications for investors and policymakers.