This year, investors have discovered growth in unexpected regions.

The S&P 500, representing the largest companies in America, has only seen a modest increase of around 1 percent in 2023. Similarly, the Nasdaq, heavily reliant on technology stocks, remains unchanged.

In contrast, the MSCI Brazil index has climbed 20 percent, and Mexico’s market has risen 18 percent. Notably, Poland, often overlooked, has been steadily gaining traction.

The WIG, Poland’s primary stock index, has surged by 28 percent in 2023 and an impressive 30 percent over the last six months. Since a downturn in fall 2022, it has rebounded by 130 percent, leading many experts to believe this upward trend will continue.

Rollo Roscow, manager of the Schroders Emerging Europe fund, commented, “Poland presents a compelling growth narrative coupled with significant stock market potential. Current valuations remain attractive as the market is under-invested and under-researched, presenting a strong opportunity for investors.”

Historically, the Polish stock market experienced a sluggish period, achieving only 43 percent growth from 2021 to 2025, while the S&P 500 gained 60 percent in that timespan. What prompted this shift?

A key factor in the market’s recovery is the leadership of Donald Tusk, a former president of the European Council who returned as Poland’s Prime Minister in 2023, after previously serving from 2007 to 2014.

The political party he succeeded, the Law and Justice Party (PiS), struggled to attract investors. Roscow noted, “The PiS party is often viewed as right-wing and nationalist, which posed concerns for corporate governance, leading to investor unease regarding potential interference with major firms listed on the exchange.”

This uncertainty dampened market sentiment, with worries about Poland’s relationship with the EU and the impact on long-term economic growth.

However, Tusk, who is pro-European Union, has fostered a more investable environment. Poland benefits from robust productivity, strong export performance, and a favorable debt-to-GDP ratio.

The ongoing conflict in Ukraine initially stirred fears among investors that it could extend into Poland, but those concerns have subsided. Renewed optimism emerged when, earlier this year, President Trump expressed intentions to facilitate a peace agreement in Ukraine.

As Poland began to look more favorable for investment, it also reaped benefits alongside Germany, especially as investors redirected their funds from the US to Europe in light of uncertainties surrounding tariffs during Trump’s presidency.

Moreover, Poland is positioning itself as a strategic defense investment, being one of the few NATO members to meet the 2 percent GDP defense spending target over the last decade, with projections indicating military spending will rise to 5 percent of GDP by 2025 and 2026.

In May, Poland entered a defense treaty with France, enhancing cooperation in defense industries, and aims to finalize a similar agreement with the UK shortly. Analysts at Morningstar anticipate Poland will secure substantial EU subsidies for defense projects, providing a boost to the manufacturing sector.

For investors looking to diversify their portfolios with Polish assets, options include low-cost tracker funds. Despite being categorized as an emerging market, Poland’s representation is minimal in broader emerging market indices. Alternatives include the iShares MSCI Poland ETF, which focuses exclusively on Polish stocks, or the Amundi MSCI Eastern Europe ex-Russia ETF, which contains 70 percent Polish equities.

For those interested in actively managed funds, an Eastern European or emerging Europe fund can also provide exposure to Poland, with the Schroder Emerging Europe fund allocating 36 percent of its assets to Polish companies.

Investing in Poland offers access to over 300 listed companies on the WIG, with a significant emphasis on the financial sector, accounting for 46 percent of the market, and notable representations in energy and manufacturing.

The Polish stock market’s composition has improved over time. Roscow pointed out, “Recent years have seen a flurry of IPOs, enhancing the quality of investment opportunities available in the stock market.”

Historically, the Polish market was dominated by state-owned enterprises that did not prioritize private investors’ interests. Now, however, a growing number of private firms with better business fundamentals are emerging.

Despite the positive outlook, challenges remain. On Sunday, Polish citizens will cast their votes in a closely contested presidential election between Rafal Trzaskowski, representing Tusk’s coalition party, and Karol Nawrocki from the PiS party.

A victory for Nawrocki could enable him to thwart many of Tusk’s proposed reforms, while a win for Trzaskowski would likely facilitate their implementation.

Roscow stated, “This presents a risk that investors should be mindful of. Should the PiS candidate prevail, a stock market downturn of 5 to 10 percent could occur as they might obstruct essential reforms. Conversely, a win for Tusk’s candidate would likely bolster the market’s performance.”