5 Things You Need to Know to Start Your Day: Americas

Good morning. China’s gloom continues, hedge funds cap a bumper year and Ron DeSantis is out of the race. Here’s what’s moving markets. — Ch [View in browser]( [Bloomberg]( Good morning. China’s gloom continues, hedge funds cap a bumper year and Ron DeSantis is out of the race. Here’s what’s moving markets. — [Charlotte Hughes-Morgan](. DeSantis out Ron DeSantis [dropped out](of the 2024 US presidential race on Sunday and endorsed frontrunner Donald Trump, narrowing the Republican field to two major candidates ahead of the closely watched New Hampshire primary this week. DeSantis’ exit is a stunning blow to the political fortunes of a candidate who just two years ago won a second term as governor in a landslide election and was heralded by big-dollar Republican donors as the future of the party. Meanwhile, Nikki Haley, the last remaining rival to Donald Trump in the Republican primaries, pressed [her attack]( on his age and mental fitness over the weekend as she seeks an upset win in the New Hampshire primary. Listen to more over on our [Bloomberg Daybreak]( podcast. Hedge-fund haul Hedge funds delivered one of the [best years]( for clients in 2023, producing combined gains worth $218 billion after fees, according to estimates by LCH Investments. The top 20 firms, which oversee less than a fifth of the industry’s assets, generated $67 billion or roughly a third of the gains last year. The report shows that Citadel, Millennium and D.E. Shaw continue to dominate multistrategy funds. “These managers have been generating above average performance over several decades reflecting the persistence of their superior returns, ” said Rick Sopher, chairman of LCH. Behind some of those record returns were bold bets on [catastrophe bonds]( and other insurance-linked securities, as the science of catastrophes helped generate the best returns of any alternative investment strategy last year. China gloom  The bad news coming out of China shows no sign of abating. A rout in [Chinese stocks]( listed in Hong Kong is intensifying, pushing their discount to mainland peers to the deepest in fifteen years in the latest sign of growing pessimism among international investors. This stands in contrast to the record highs seen for US gauges recently. The steeper losses in Hong Kong, where some of China’s most influential and innovative firms are listed and Beijing’s interference is less felt, add to the [worrisome picture](of global investor sentiment toward the world’s No. 2 economy. Investors also expect the yuan and government bonds to [underperform]( this year. The Hang Seng dropped closer to a level last seen almost two decades ago. Buy the dip Two major Wall Street firms are recommending investors start [buying five-year US notes]( after they saw their worst rout since May last week. Morgan Stanley sees scope for a rebound in Treasuries on expectations data in the coming weeks may surprise to the downside. JPMorgan is also suggesting investors buy five-year notes as yields have already climbed to levels last seen in December. However, it warned that markets are still too aggressive in pricing for an early start to central bank interest-rate cuts. Sustained pushback from central bank officials, along with healthy data on retail sales, meant last week traders [slashed bets on interest-rate cuts]( from the Fed this year. This sent yields climbing 22 basis points, the most since the period to May 19. Coming Up... After a data heavy week last week, today we’re due the Leading Index for December, which provides an early indication of significant turning points in the business cycle and where the economy is heading in the near term. The index declined by 0.5% in November. Later in the week, we’ll see a spate of trading updates from a wide range of companies, including tech giants like IBM and Netflix. It’s a slightly quieter start today however, with Zions Bancorp and United Airlines set to report after market close today. United was one of the carriers that found loose bolts in multiple of its Boeing 737 Max jets after the Alaska Airlines mid-flight blow-out. What We’ve Been Watching This is what’s caught our eye over the past 24 hours. - Big Take: The SEC is Planning a [Bond Market Overhaul]( - Netanyahu [rejects]( Hamas’s terms for hostage release - Amer Sports reportedly considers [US IPO]( - [Taiwan export orders]( plunge on tumbling demand from the US and Europe - Macy’s rejects investors’ takeover [offer]( - [Listen to Odd Lots](: Brevan Howard’s Top Economist Sees Recession Coming in 2024 - Discover how Wall Street is already [gaming out]( the impact of a possible Donald Trump victory And finally, here's what Joe’s interested in this morning On the new Odd Lots podcast, [our guest is Jason Cummins](, the top economist at fund manager Brevan Howard. Cummins is among the more bearish macro guests we've talked to in awhile. At a time when the stock market is at all-time highs, and soft-landing optimism is widespread, he sees a recession in the cards in 2024. In particular, he thinks the labor market is weaker than people appreciate, with measures such as the Labor Force Participation Rate in retreat. He also points to internal labor force flows as showing sharp deterioration. Beyond the short-term outlook Cummins sees three huge macro turning points happening right now: -The end of secular stagnation in the US and elsewhere. - The end of China's existing growth model (as Xi turns towards more economic nationalism, and visions of shared prosperity). - The end of "the end of history". Basically the idea here is that we're in a period where much of the world is looking at alternatives to liberal democracy. This, in Cummins' view, will heighten geopolitical tension, making the world a more dangerous, and more costly place to live. It was fascinating discussion, worth checking out wherever you get your podcasts. Follow Bloomberg's Joe Weisenthal 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. Before it’s here, it’s on the Bloomberg Terminal. Find out more about how the Terminal delivers information and analysis that financial professionals can’t find anywhere else. [Learn more](. Want to sponsor this newsletter? [Get in touch here](. 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