Market Update

It has been a relatively calm week, with several Asian markets closed due to Lunar New Year celebrations, offering a brief respite from the recent market turbulence caused by rising US interest rates, the US government shutdown, trade tensions, Brexit uncertainties, and civil unrest in France.
Even President Donald Trump's State of the Union address on Tuesday, February 5, 2019, failed to stir the markets, as he didn't introduce any new significant policies. While his speech catered to his Republican base, it did nothing to bridge the gap between the Democrats and Republicans. For instance, although he reiterated his commitment to building the border wall, he didn't outline how he planned to fund it or offer any incentives to break the funding deadlock with the Democrats.
This deadlock implies a possible partial government shutdown when the current stopgap spending bill expires on Friday, February 15, 2019, unless the Democrats agree to Trump's demand for $5.7 billion for the wall's construction.
Additionally, on Thursday, February 7, 2019, Trump mentioned that he might not meet with Chinese President Xi Jinping before the March 1, 2019, deadline to avoid new US tariffs on Chinese goods. While this development is disappointing, it might not have as negative an impact as it seems. Logistically, arranging such a meeting is complicated, especially considering Trump's upcoming meeting with North Korea's Kim Jong Un at the end of February. Furthermore, given the substantial progress observed in recent talks, it's likely that the March 1 deadline will be extended. Consequently, we have slightly reduced cash levels in the 'Growth' portfolios and increased exposure to Asian and Emerging Markets.
On the monetary policy front, as anticipated, the Bank of England (BoE) kept UK interest rates unchanged at 0.75% due to Brexit uncertainties. The BoE lowered its growth projections for 2019 from 1.7% to 1.2% and suggested that only one more interest rate increase is needed in the next three years to maintain inflation close to the 2% target.
However, these BoE forecasts seem somewhat futile, given the imminent Brexit on March 29, 2019, with no certainty regarding a deal, an extension of Article 50, or a no-deal outcome. There's a risk that the BoE might raise UK interest rates in the event of a soft-Brexit or no-Brexit due to their underlying hawkish stance, which I consider a policy mistake given the high levels of household debt.
Regarding a no-deal Brexit, the BoE's indication that they might increase interest rates to support the pound appears improbable. History, particularly the 'Black Wednesday' incident in 1992, demonstrates that increasing interest rates to stabilize the pound might not be effective. In 1992, despite raising rates to 15%, the UK was forced to withdraw from the European Exchange Rate Mechanism (ERM).
Looking ahead, the upcoming week holds more significant events. Both the UK and the US will release data on Consumer Price Index (CPI), Producer Price Index (PPI), and retail sales. Additionally, fourth-quarter GDP data for the UK, US, and the Eurozone will be announced, promising a more engaging week in the financial markets.