The firm downgraded the probability of a recession to 20% from 25% to 35% earlier. Drivers in traffic jams often try to change lanes to ones seemingly moving faster. But according to a 1999 study by the statistics professor Robert Tibshirani, it's an illusion. Lane changing doesn't speed things up, and it can increase the risk of collisions.
The bank's base-case target for the S&P 500 at the beginning of this year is also optimistic, in a 4,200-4,300 range, with a better scenario being 4,800, or a 27% upside, according to Mossavar-Rahmani. "What is really fascinating when you've had this kind of narrow breadth, the market actually continues to rally," Mossavar-Rahmani said."So in the three instances we can look at in the last 20, 30 years, the market actually continued to have double-digit returns after that. And again, looking at the specific episodes, the lowest was around 16%. The highest was around 45% increase.
Mossavar-Rahmani also noted that history demonstrates that a US-centric portfolio remains favorable relative to emerging markets. For example, if an investor had put $100 million in the S&P 500 at the trough of the global financial crisis when earnings were low, that amount would now be equivalent to $880 million. The same amount invested in China would have yielded only about $260 million, she noted.