Could today be the pivot we’ve been waiting for?
The big news out of Ukraine meetings in Paris is that the US appears to be supporting security guarantees for Ukraine with its military. The four-year anniversary of the war is Feb 24 and hopefully we can get a ceasefire before then.
The headlines crossing the wires from Paris today are painting an increasingly constructive picture. While markets have learned to be skeptical of geopolitical headlines, the coordination displayed today by the "Coalition of the Willing" feels substantial.
The meeting between Zelenskiy, Macron, Starmer, and US envoys has produced a "Declaration of Paris," and for investors, the details regarding security guarantees are the key takeaway.
Here is a look at why today’s news matters for the risk outlook.
1. Clarity on US Involvement
One of the persistent market fears has been the ambiguity of U.S. support in a post-conflict scenario. Today offered some necessary clarity. Macron’s comments on a "US backstop" and Envoy Witkoff’s statement that they are prepared to "do anything necessary" suggest a firmer commitment than previously.
2. Rebuilding
Reconstruction is a major theme in the headlines. The discussion of a "prosperity agreement" linked directly to security protocols is significant. It signals that the West is looking to anchor peace through economic integration. For European markets, this is a potentially strong signal for future growth, though the timeline remains an open question.
3. "Hardest Yards" Still Ahead
It is important to keep the optimism in check. PM Starmer rightly noted that the "hardest yards are still ahead," and Zelenskiy acknowledged that "territorial issues" were discussed—likely the most difficult part of any negotiation. However, agreeing on a legal framework for security guarantees is a necessary precondition for those difficult talks to proceed. It’s a milestone, even if it’s not yet the finish line.
The market has been gradually pricing out extreme geopolitical risks and I wonder if peace is already priced in but there are some clear trades if not:
EUR/USD: The euro stands to benefit from any reduction in regional instability and it was the top performer last year after years of struggles. A credible path to peace removes a significant structural drag on the currency.
European Equities: Stability is the primary requirement for capital flows. If these security guarantees look durable, it improves the long-term case for European assets, particularly in sectors tied to infrastructure and reconstruction.
Gold: If the geopolitical temperature lowers significantly, the safe-haven premium in gold could face some headwinds, though this will likely be a slow grind rather than a sudden drop. Then again, one war ending just puts the superpowers on course for a different one in a world that's increasingly unmoored.
