5 Things You Need to Know to Start Your Day

Jeffrey Gundlach prefers bonds, Apple looks to use its own custom screens and stock bears feel the pain. — Kristine AquinoPay attention to t [View in browser]( [Bloomberg]( Jeffrey Gundlach prefers bonds, Apple looks to use its own custom screens and stock bears feel the pain. — [Kristine Aquino]( Bond bulls Pay attention to the bond market — not the Fed — for how interest rates will evolve, according to fixed-income manager [Jeffrey Gundlach](. The DoubleLine Capital chief executive says he prefers bonds over stocks, and recommends a 60% bonds, 40% stocks portfolio, rather than the more traditional opposite version of 60% equities and 40% bonds. Jupiter Asset Management's Ariel Bezalel, whose firm oversees $53 billion in assets, [believes]( 10-year Treasury yields could fall as low as 2% this year. "There is enough data for the Fed to soon go on hold", Bezalel said, adding the central bank could cause a "hard recession" if they don't back off soon. Homegrown Apple Apple is planning to start using its own [custom displays]( in mobile devices as early as 2024 in an effort to reduce its reliance on technology partners like Samsung and LG and bring more components in-house. The company aims to begin by swapping out the display in the highest-end Apple Watches by the end of next year, according to people with knowledge of the matter. The changes are part of a sweeping effort to replace Apple supplies with homegrown parts, bringing more control over the design and capabilities of its products. A representative for Apple declined to comment. Bears battered After a yearlong tumble in American stocks that proved a disaster for bulls, [the hardships of being short](suddenly became vivid. Goldman Sachs’s basket of most-hated stocks climbed more than 4% on Tuesday, saddling bears with losses. While the S&P 500 have alternated between gains and losses into 2023, each up day overpowered the previous down session, resulting in an overall gain that marked the market’s best start to a year since 2019. “There’s a FOMO element here with investors who are worried about being caught offsides if equities embark on a durable rally,” said Adam Phillips, managing director of portfolio strategy at EP Wealth Advisors. “Everyone knows bear market rallies are common, but it can be hard for some to remember that in the moment.” Stocks gain S&P 500 and Nasdaq 100 futures both climbed 0.1% as of 5:46 a.m. in New York. The Bloomberg Dollar Spot Index was little changed, leading to mixed trading in Group-of-10 currencies. Treasuries advanced, in line with gains in bond markets in Europe and the UK. Oil and gold climbed, while Bitcoin fell for the first time in more than a week. To catch up on the trading day in the UK and Europe, [check out today’s edition of City Latest](. Coming up… At 7 a.m., we’ll get the latest data on mortgage applications. The EIA will publish figures on oil inventories at 10:30 a.m. The US will sell $36 billion of 17-week bills at 11:30 a.m., followed by $32 billion 10-year notes at 1 p.m. What we’ve been reading Here’s what caught our eye over the past 24 hours: - Elon Musk might never be [the world’s richest person]( again - `Three Amigos’ summit ends with an [awkward press conference]( - Credit Suisse weighs a [50% cut to its bonus poolÂ]( - [London, Chicago]( top list of world’s most congested cities - [Tom Brady, Gisele Bündchen]( among FTX shareholders facing a wipeout - Japan is the [world’s most powerful passport]( in 2023 - A New York program has [trained 1,700 workers for green jobs]( And finally, here’s what Joe’s interested in this morning "Immaculation disinflation" is a phrase that gets bandied about more and more. Basically this idea that in the dream scenario we get a sustained drop in inflation without some concurrent bad thing, like a big drop in employment. Its meaning isn't that different than that of "soft landing." Mainstream economists have generally been skeptical of the prospects for this, though for now it can't be totally ruled out. In a [post on the Employ America blog]( titled "The Fed Is Trying To Engineer A Recession" [Alex Williams]( introduces a different concept. Immaculate stabilization of the job market. As he notes, in the Fed's own projections of what will happen to the economy under appropriate monetary policy, the unemployment rate is expected to rise to 4.6% this year and then... just stay there. The problem is that there's no historical precedent for this. Over the last 70 years, with the exception of 1980, every single time that the unemployment rate has risen by at least 1% within a year, it then went on to rise by at least another 1% on top of that. This is intuitive. Downturns have momentum. Job losses mean less income. Less income means less spending. Less spending means less revenue for firms. Less revenue for firms mean more job losses. Once the demon of layoffs gather stream, it's not easy to stop. [Here's Alex](: Simple back-of-the-envelope math says that a 1% increase in the unemployment rate represents a net loss of nearly 1.5 million jobs over one year, assuming the Labor Force Participation Rate (LFPR) holds steady. If LFPR falls with employment, as it traditionally has during recessions, the Fed could plausibly be targeting as many as 2 million jobs lost or foregone. Yet the Fed is now announcing that it intends to defy both historical trends and common definitions. Instead of defending or justifying the predictions made in the December SEP, Fed officials have argued that the outcomes they are aiming for are (1) not recessionary and (2) that the unemployment rate will immaculately and immediately stabilize. As the pandemic has amply shown, even the most durable regularities can break down. But extraordinary claims warrant extraordinary evidence, and explanation. Instead, the Fed’s projections risk landing on the border of self-delusion and obfuscation. The good news is that for now the rapid pace of rate hikes hasn't translated into job market weakness. The unemployment rate is at a 50-year low. But as I've been writing about a bunch here, one of the central questions is whether there's any scenario at all (even with falling inflation) in which the Fed will be happy with unemployment rate this low. It's possible that the Fed will never believe that inflation is vanquished if it's not accompanied by some degree of labor market weakness. And if that's the case, then the risk is that a seemingly modest increase in the unemployment rate will turn into a severe increase. Follow Bloomberg's Joe Weisenthal on Twitter [@TheStalwartÂ]( Follow Us You received this message because you are subscribed to Bloomberg's Five Things - Americas newsletter. If a friend forwarded you this message, [sign up here]( to get it in your inbox. 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