Yet when it comes to investing, Europe is often treated as a single, troubled region — slow-growing, politically messy, and weighed down by history. That perception deserves a rethink.

The question many investors are asking now is whether peace in Europe — particularly any easing of conflict on its eastern border, in Ukraine — would be good for European stocks. The short answer is yes. The more useful answer is why, and where.

Peace reduces risk — but it doesn’t change the direction of travel
Markets don’t like uncertainty. War creates it. So, any credible move toward peace is likely to lower the risk premium investors demand to own European assets. That alone can support higher share prices.

But peace does not mean Europe suddenly relaxes. As Pie Fund’s Head of UK & European Equities, Toby Woods, explained to our clients on a recent visit to New Zealand, Europe has learned a hard lesson. Regardless of how or when hostilities end, defence spending is rising structurally. NATO countries are committing to materially higher defence budgets, moving well beyond the old 2% of GDP target.

From an investment perspective, this is important. Even with peace, defence spending doesn’t disappear — it becomes more predictable, more planned, and more long-term. That kind of visibility is often welcomed by markets.

Germany’s comeback matters more than headlines
For investors, the bigger story may be Germany.

Germany is Europe’s largest economy and has been a drag on growth in recent years. That is changing. Following elections earlier this year, the new government loosened Germany’s long-standing debt restrictions and announced an almost €1 trillion, ten-year investment programme focused on infrastructure and defence.[1]

This “fiscal bazooka” is not a short-term stimulus. It is a structural reset — one that extends into housing, transport, digitalisation, and energy infrastructure. History gives us a useful reference point: following German reunification in the early 1990s, sustained investment drove a prolonged period of German equity outperformance versus the US, UK, France, and Japan.[2]

If Germany follows through — and all signs suggest it will — Europe’s growth profile begins to look very different.

Europe is diverse — just like Kiwi travel itineraries
Anyone who has travelled through Europe knows it makes little sense to talk about it as a single destination. Investing is no different.

Spain, for example, is forecast to grow close to 3% — roughly double the pace of advanced economies as a whole. Ireland, Greece, and Portugal are also growing strongly, having emerged from the debt crises of the past decade leaner and more competitive.[3] These are the same countries many New Zealanders now holiday in regularly, often remarking on how much they’ve changed.

France and the UK, meanwhile, face more familiar challenges around fiscal discipline and reform. The key for investors is flexibility — the ability to shift capital toward regions with momentum and away from those with unresolved issues.

Capital flows: the turning tide
One final factor often overlooked is capital flows.

European equities have suffered years of outflows, particularly in smaller companies.[4] Money has been leaving the region steadily. Recently, that pressure has begun to ease. In the last two decades a large portion of UK and European pension money has headed across the Atlantic, but with uncertainties in the White House disrupting the global order, we understand that tide has started to turn. Europeans want to more money to stay at home.

Even a modest reversal — money simply stopping its exit and beginning to trickle back in — can have an outsized impact on share prices. 

Markets don’t need perfection. They need change at the margin.

Why Kiwis should think about investing where they travel
New Zealanders are naturally global thinkers. We travel far, we compare value across borders, and we understand that opportunity often lies offshore.

Europe is familiar to us as travellers. We understand its diversity, its resilience and its ability to reinvent itself. Investing there is simply the financial extension of that mindset.

Peace, if it comes, is unlikely to be a magic wand. But combined with rising investment, structural reform, and shifting capital flows, it could mark the moment when Europe moves from being a holiday favourite back to being an investment opportunity as well.

[1] Source: Berenberg
[2] Source: Bloomberg; DAX, UKX, SPX, NKY, CAC
[3] Source: IMF
[4] Source: The Investment Association

Information is current as at 12 March 2026. Pie Funds Management Limited (“Pie Funds”) is the issuer and manager of the funds in the Pie Funds Management Scheme and the Pie KiwiSaver Scheme (“Schemes”), the product disclosure statements of which can be found at www.piefunds.co.nz. Any advice is given by Pie Funds and is general only. Our advice relates only to the specific financial products mentioned and does not account for personal circumstances or financial goals. Please see a financial adviser for tailored advice. You may have to pay product or other fees, like brokerage, if you act on any advice. As manager of the Schemes, we receive fees determined by your balance and we benefit financially if you invest in our products. We manage this conflict of interest via an internal compliance framework designed to help us meet our duties to you. For information about how we can help you, our duties and complaint process and how disputes can be resolved, or to see our disclosure statement, please visit www.piefunds.co.nz.  Please let us know if you would like a hard copy of this disclosure information.