5 Things You Need to Know to Start Your Day

Good morning. An S&P 500 record is in sight for 2024 though don’t expect another rally like this year’s. Rate-cut debates will dominate mark [View in browser]( [Bloomberg]( Good morning. An S&P 500 record is in sight for 2024 though don’t expect another rally like this year’s. Rate-cut debates will dominate markets as central banks step into the spotlight this week. Plus, Macy’s could be taken private. Here’s what people are talking about. — [Sofia Horta e Costa]( Tell us what you want to see in the Five Things newsletter! Please [take our quick survey here.]( S&P 500 record Investors [cautious]( about a week packed with central bank decisions find reason to be optimistic about 2024. Some Wall Street strategists, including those at Deutsche Bank and RBC Capital Markets, are predicting an all-time high for the S&P 500 as they say the index has now adapted to the higher rate environment. Respondents in Bloomberg’s latest [Markets Live Pulse]( survey agree and are [eyeing 4,808 points]( for the benchmark, which would take it just above its January 2022 closing record. Still, that only implies a gain of just 4.4% from current levels — and the fate of the index rests increasingly on whether Big Tech [can deliver on AI profits](. Rate debate The [most important question]( facing investors next year is not whether the Federal Reserve will cut interest rates, it’s why. If policy makers are striving to stimulate an economy out of a slump, then that suggests stock markets would also be contending with falling corporate profits. But if the Fed claims victory over its inflation fight without crashing the economy — pulling off the elusive soft landing — that’s a different story entirely. With markets pricing in 110 basis points of cuts by the Fed next year, it’s a debate shaping up to dominate markets in 2024. For some businesses and governments carrying growing debt loads, rate reductions from not only the Fed but other central banks [can’t come soon enough](. Multiple euro region economies are shrinking and homeowners in countries like Canada — where floating-rate mortgages dominate — are [slashing spending](. In Africa, Ethiopia is set to join Zambia and Ghana [as a sovereign defaulter](. Markets elsewhere One of the bigger moves in an otherwise quiet Monday has been in Japan. The country’s [currency weakened 1%]( as traders dialed back bets that the negative-rate holdout would go into positive territory any time soon. That’s after people familiar with the matter [told my colleagues in Tokyo]( that Bank of Japan officials have yet to see enough evidence of wage growth that would support sustainable inflation. The Japanese yen has become the worst performing G10 currency this year. Over in China, much of the conversation has been around the weekend’s worse-than-expected [deflation numbers](, which have deepened fears around whether Beijing can revive demand in the economy. That’s weighing on the outlook for iron ore. Meanwhile, [oil is recovering](from the market’s longest weekly losing streak in five years and crypto tokens are [swinging violently]( as Bitcoin drops back toward $40,000. Deals latest Macy’s has received a [$5.8 billion buyout offer]( from Arkhouse Management and Brigade Capital Management. The take-private offer of $21 a share is a bet that the troubled retailer can execute its turnaround better away from the scrutiny of public markets. The shares are surging as much 22% in pre-market trading. One deal that’s fallen apart is Cigna’s [mega combination]( with Humana — a deal that would have been one of the largest of the decade. Cigna is walking away from talks after struggling to agree on a price, particularly after a drop in Cigna’s shares. The insurer now plans  a “significant” increase of its stock buybacks, according to a statement on Sunday where it refrained from mentioning the talks with Humana. And in golf land, a Fenway Sports Group-led consortium [is in the running to be a co-investor]( in the entity being formed by the PGA Tour, Saudi Arabia’s Public Investment Fund and the DP World Tour. Coming up… Ukraine’s Volodymyr Zelenskiy [is on his way to Washington]( for talks with President Joe Biden and is expected to make an address to US senators on Tuesday morning. On the economic data front, there’s not much on the calendar today aside from the New York Fed’s survey of consumer expectations for inflation in the year ahead. No Fed speakers are lined up ahead of the central bank’s interest-rate decision on Wednesday. If you missed what happened last Friday and have no idea why markets cheered November’s jobs report, Bloomberg Opinion’s John Authers [breaks it all down for us here](. What we’ve been reading This is what’s caught our eye over the past 24 hours. - Javier Milei [took office](as Argentina’s president on Sunday. - Wall Street gets ready to cash in on [$1 trillion climate market](. - A Huawei phone shows China is also [replacing US suppliers]( of 5G tech. - Hong Kong’s local council elections draw the [lowest turnout since 1994](. - The pilot of a US F-16 jet is safe after crashing off the [South Korean coast](. - Musk [restores the X account]( of right-wing conspiracy theorist Alex Jones. - Abu Dhabi is the world’s newest [wealth haven]( for billionaires. And finally, here's what Joe’s interested in this morning There are two big events this week, macro-wise. First up tomorrow is CPI, which is expected to show a flat month-over-month headline reading, and a 0.3% increase in the core rate. Then on Wednesday we get the Fed decision. While everyone expects a pause, a fresh set of dots (the Summary of Economic Projections) and Powell's press conference will be scrutinized for any hints in terms of future rate cuts. Of course, this all comes on the heels of this past Friday's jobs report, which saw the unemployment rate improve to 3.7%, which was another sign that while the labor market may be cooling, it's still overall healthy, and so the soft landing possibility remains in place. In the meantime, something worth noting is that we've seen some nice gains lately in real wages. With average hourly earnings continuing to grow at a time when gas prices have kept the headline inflation rate depressed, workers are on a nice run of seeing their dollars go further each month, helping to reverse a particularly brutal stretch in 2021 and 2022. From the Fed's perspective, obviously, various flavors of core inflation are what matters. But just from an overall economy/sentiment standpoint the simple math of steady wage growth plus the plunge in gasoline prices is an encouraging development. Joe Weisenthal is the co-host of Bloomberg’s Odd Lots podcast. Follow him on X [@TheStalwart]( Like Bloomberg's Five Things? [Subscribe for unlimited access]( to trusted, data-based journalism in 120 countries around the world and gain expert analysis from exclusive daily newsletters, The Bloomberg Open and The Bloomberg Close. Tell us what you want to see in the Five Things newsletter! Please [take our quick survey here.]( [Bloomberg Markets Wrap: The latest on what's moving global markets. Tap to read.]( Follow Us Like getting this newsletter? [Subscribe to Bloomberg.com]( for unlimited access to trusted, data-driven journalism and subscriber-only insights. 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