Funds poured into tariff havens, and the emerging country's stock market soared 28% this year!

Source: Wall Street News

Is Poland Leading the Next Big Bull Market in Emerging Markets?  

Data shows that Poland's main stock index, WIG, has risen 28.6% this year, far exceeding the S&P 500's cumulative gain of just 1%, making it one of the world's strongest-performing markets in 2025.  

Analysts note that Poland's robust stock performance partly stems from its relative independence from global trade wars and expectations of benefiting from Germany's massive fiscal stimulus plan.  

Tomasz Bardziłowski, CEO of the Warsaw Institute, states that this rally is driven by "substantial foreign capital inflows," fueled by Poland's healthy economy, rising stock dividends, and relatively low valuations.  

Bardziłowski points out that Polish stocks currently trade at a price-to-earnings ratio 15% lower than the MSCI Emerging Markets Index.  

### U.S. Trade Wars Boost "Peace Trades," Economic Growth Remains Resilient  

Since April, Trump's trade wars have effectively shifted capital flows from the U.S. to emerging markets less affected by tariffs, such as Poland and some Latin American countries.  

Piotr Arak, Chief Economist at VeloBank, notes:  

"The market is small enough that foreign capital flows can have a noticeable impact."  

Second, Poland's domestic economic growth has shown strong resilience.  

Eurostat data reveals that Poland's economy grew 3.8% year-on-year in Q1 2025, the second-fastest in the EU (after Ireland) and well above the EU average of 1.4%.  

Analysts expect Warsaw Stock Exchange-listed companies to see an average earnings-per-share growth of about 10% in 2025. Among them, financial services firms—comprising 40% of the WIG index—are increasing dividends after record profits this quarter.  

Beata Javorcik, Chief Economist at the European Bank for Reconstruction and Development (EBRD), attributes Poland's resilience during these turbulent times to "its diversified economy, large domestic market, and limited direct trade exposure to the U.S."  

### EU Funds Provide Extra Momentum; Focus on June Presidential Runoff  

Additionally, the return of Polish Prime Minister Donald Tusk and his pro-EU coalition has unlocked billions of euros in previously frozen EU funds, primarily for infrastructure and energy transition projects. The government is deploying these funds to reduce reliance on coal.  

Driven by these initiatives, shares of state-owned energy groups have soared: oil company Orlen has risen 53%, and utility firm PGE has gained 56% year-to-date.  

Investors are now closely watching the presidential runoff election on June 1.  

Currently, ruling party candidate Rafał Trzaskowski is locked in a surprisingly tight race with opposition Law and Justice Party (PiS) candidate Karol Nawrocki.  

Piotr Bujak, Chief Economist at Poland's largest bank PKO BP, warns:  

"If Tusk's party candidate wins, it will boost investor confidence in Polish assets. A defeat, however, could reignite concerns about whether Poland will continue its reform path."  

### Emerging Market Opportunities Emerge; Poland May Be Just the Beginning  

Poland's case may only mark the start of emerging markets' rise.  

With growing expectations of a weaker U.S. dollar, a potential peak in U.S. bond yields, and anticipation of China's economic recovery, emerging markets are rebecoming a focal point for global investors.  

According to Bank of America strategist Michael Hartnett, so far in 2025, not only has Poland's stock market been the best performer, but:  

- Worst-performing asset: Oil (-12%)  

- Best-performing asset: Gold (21%)  

- Best-performing currency: Russian ruble (41%)  

- Tel Aviv and Tehran stock exchanges hit all-time highs  

Hartnett concludes that geopolitics will drive markets this year, and "peace trades" will outperform "war trades" in 2025. In such an environment, "nothing will perform better than emerging market equities."  

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