Market Uncertainty Over Tariffs Is Easing, Manulife IM's Franklin Says

Manulife Investment Management's Marc Franklin indicates that despite increasing US tariff levels, a reduction in policy uncertainty is proving constructive for risk appetite. Franklin also noted mixed evidence regarding the medium-term inflationary impact of these tariffs.

Analysis

According to Marc Franklin of Manulife Investment Management, a key shift is occurring in market perception of trade policy. Despite the tangible increase in US tariff levels, a concurrent decline in policy uncertainty is proving to be a net positive for market sentiment. This reduction in ambiguity is described as "constructive for risk appetite," suggesting that investors are prioritizing predictability and clarity over the specific negative impact of the tariffs themselves. This dynamic is reflected in the market's moderately positive, risk-on tone. However, Franklin also introduces a significant caveat regarding the medium-term economic impact, noting there is "mixed evidence" on whether these tariffs will prove to be inflationary. This implies that while near-term sentiment may improve due to policy clarity, the fundamental impact on inflation and corporate costs remains a key unresolved variable.

Key Decisions for Investors

• Given that declining policy uncertainty is viewed as constructive for risk appetite, investors may consider that assets previously weighed down by trade ambiguity could see improved performance.
• The mixed evidence regarding the medium-term inflationary impact of tariffs suggests investors should closely monitor inflation indicators, as an unexpected rise in prices could quickly reverse the current positive sentiment.
• The market's current focus on policy stability over tariff levels implies that investments should be evaluated based on their resilience to a new, clearer trade regime, rather than holding out for a complete reversal of tariffs.