>> from the financial centers of the world, this is bloomberg markets with alix steel and guy johnson. alix: it is 30 minutes into the trading day on monday. these the top market stories. so they'll crashes, he's not alone. at top 20 hedge funds break-in over $20 billion after fees. elliott goes after salesforce. he buys a steak after layoffs. we will get the latest. the bear speaks out. we will get the call from morgan stanley. the reckoning could come soon.

welcome to bloomberg markets. this leaves us to the question, we have the economic data. some of it is holding up. some of it is rolling over. what does that do to topline companies? tom: i think this is going to be the narrative going through the next few weeks. i know what you're saying about the data. it's only the survey data that i think has rolled over. we will get more of that tomorrow in the form of pmi. normally, you would go survey data, hard data. the hard data is not there yet. particularly on the employment front. at the moment, the employment story is holding up, which means good topline growth. it is bad for margins. that is not good for the bottom line. alix: leading indicators fell one percentage point. that is worse than estimates.

that is a leading indicator. that is not hard data. you're looking at a solid rally in the equity market. guy: you are seeing it in some of the corporate numbers. there are chemical companies in europe that are seeing the margin squeeze that ultimately is coming down the pike toward a lot of companies. it all comes down to what is happening with the labor market. if the labor market holds up and the market looks good, we are going to have -- it's another trajectory that the bears are off. it goes something like this. will the economy and stocks diverge? could you have an earnings recession without an economic recession? can you have a bear market and a soft landing. these are the things we need to figure out. mike mckee is with us to figure

out the question. from a market perspective, they are anticipating we will see earnings hits at some point. the timing question is the real factor. let's go to the question of the day. if the employment situation holds up, what happens in the margin story? what happens to the bottom line? can we get that with a soft landing? >> the answer is yes. that is because of a function of what we've seen in the last two or three years. if you have a bad economic news, it is good news for the market because of what the federal reserve is going to do. i think the big nuance this time is something our intelligence strategist said this morning, if you look with the earnings are telling you on the top line so far, if you look underneath the hood it, profitability is the issue.

they are missing on the sales front. they are not missing on the overlying kind of image. a lot of that is being rewarded by the stock market. on the surface, they are meeting earnings. a lot of this is because all of last year was so painful. we are starting to see the economy catch up to what the stock market has priced in. that's where we see the divergence. the economy is slowing down it. the economy is slowing down and the sales are slowing down. again, it depends on what the investors are going to react to. they are acting -- reacting to the surface level. alix: if you look at the soft versus hard data, if it catches up with the soft data that is

rolling over, what happens? mike: we don't know for sure what's going to happen. it looks like what we are getting is a slowdown in the economy. it is one that's going to be different than previous situations. normally when you see a slowdown in demand brought on by raising interest rates, company start to cut back. you see less production. you see fewer people working. all the anecdotes are trying to hold onto them. consumers are going to have spending power. it will be interesting to see with the overall spending numbers were for the month of december on friday. retail sales were a disappointment. what about services? it's going to be reasonably good news. the recession story has been people are going to start

running out of money. we see bank accounts being spent down. we see credit cards being used a lot more. if everybody still has jobs, it could work. guy: how long do you think from here, how long would you normally expect a showing -- a slowing economy to show up in the employment data? last week's claims number was a real game changer. it is not easing up. how long would history tell us it takes a policy to work on employment? when would we expect this to happen? mike: historically, the lags of taken 12-18 months. we are seeing a slowdown in the amount of hiring. companies are sort of pausing on

hiring, whether they can't find enough workers. the labor market is so tight. we are not seeing the unemployment rate go up. either that has to start happening soon or soft landing story starts to get more credence. alix: at least to the labor thing, there are two ways of looking at it. you have a job so you still spend. the topline is ok. if you hoard labor but you don't have the topline and your margins get squeezed, how much of that leverage do you have to pull to keep the labor? >> this is where the exception you just made it. last year, one of the big issues when you're looking at mcdonald's was commodity prices were going up. food prices were going up. more so than that was the wage they had to pay their staff in the u.s. and around the world. as you start to see wages stay

stable, that is a positive. even if you don't see improvement in the wage data or the layoff date or the jobs data, that is still a positive for a lot of these companies. the stock market will respond to that. it is no longer responding the way it did in 2022. even for it to plateau, that's a good thing. guy: let's wrap this up. we are potentially looking at a stop -- soft landing. we are looking at a labor market that is going to hold up. how's the fed look at this scenario. this is not the scenario they anticipated nine months ago. how is the fed going to review the situation. are they going to be concerned about it? are they going to lean in on it? does one of the factors change

significantly because the fed feels like it needs to? mike: it's going to come down to earnings. not this dock market, but your earnings. we will see the average earnings continue to rise at an unsustainable level. if that's the case because there is still a shortage of people that are available to be hired, the fed is going to be concerned and raise rates. if we start to see wage gains fall to an acceptable level at the same time inflation is coming down, even if the labor market stays strong, the fed governor was asked about it last friday. he said he would be happy if we had that scenario. alix: this perfectly highlights how confusing this market actually is. thanks a lot. we appreciate it. coming up, will the economy and stocks diverge? mike wilson will be joining us next. this is bloomberg. ♪

>> since that october low, to the december 13 hi, the dow is up 21%.

the s&p is up 18%. there has been a nice recovery. since then, the market has been consolidating. alix: that was market historian ralph. he sets us up for the question of the day. will the economy and stocks diverge? joining us is mike. the economy rolls over and the socks hold up? or vice versa? and those things happen? mike: i think if the economy rolls over into recession, it's unlikely stocks will hold up. the reason is because we don't know the answer yet. there is an opportunity for the fed to orchestrate the soft landing. that's where we differ from those people. if we don't get a labor cycle because companies are courting

labor, that is worse for margins in the short term. secondarily, you don't really have anything to get excited about. there is no re-acceleration next year. as bearish as we are, we are more bullish in 2024. we think we are in this boom bust boom environment. you can't have your cake and eat it too. you can't so i will look through this and play the next boom. that's not really advised. if you agree with our earnings call next year, you have to agree with it this year. guy: in terms of how we think this is going to play out, you think this is a near-term phenomenon? you think this is going to happen soon. i'm looking at the soft data. i'm looking at the heart data holding up.

i'm looking at the employment data in particular helena. which piece of data is going to get the markets to pay attention on the economic front. mike: it always comes down to earnings. earnings is the hard data the drives stock prices the most. we have always said that. we continue to believe that. we are trusting our process. the leading indicators for the hard data is soft data. the soft data has rarely looked this week. you have to be assuming it is different this time for the hard data not to follow. that is not a position we want to take. we just had a rally over the last three months, we sometimes get coined with being permit bears. we called for that rally. we got chased off the screen then. what's amazing to me is very few people want to play that rally in the fall.

the last thing i would say is we are excited about the confluence of opening, gas prices have come down precipitously in europe, which is keeping them out of recession. then you have the hope for a fed pivot, which is a call after this next meeting. you already priced all those things. the valuation does not reflect the earnings risk we see in the u.s., which is not going to change from those developments. alix: on that point, a china reopening is in the early earnings and could unlock $1 trillion in savings. you disagree with the number or you think that is already priced. mike: there is a timing to that. $1 trillion is going to come out in the next three months. our intelligence tells us

consumer confidence is still very fragile. they are reopening and that's a good thing. the average consumer is still skeptical. they are still scared of the virus as they should be. there has been increased death rates. it's going to be slow. we've been working on this. we think china's reopening is good for china. it's not going to drive earnings growth in the u.s.. china is 3% of the s&p 500. even if it's a fast reopening, is not going to move the needle in the short term. guy: hear me out on this. china opens, good for europe. gas prices are coming down. european stocks have been outperforming.

can i drop those dots together? do you think that is already worked? >> that has been our call. the charts don't lie. they are showing the strength over s&p as well as europe. this is the first time in recent memory that has happened. we think it's a function of a couple of different things. the relative growth profile is improving outside the u.s.. in october, the big tech stocks, they had a really difficult time with earnings. stocks came down sharply. we think that is being rio alec -- reallocated around the world. that could take years for that capital to be redeployed in areas of the global market that are more attractive. alix: how much money has to come

out of those? mike: we don't know. what we do know is the capital concentration that has occurred over the last decade has been unprecedented. it will be persistent, particularly if strength continues to underperform. you did start off this presentation by looking at technicals. that is the strongest i can see. it's the mirror image of what we experienced the last seven years. guy: ok. let's wrap it up with a technicals. what we think about those october lows? do we go through them? have we formed a base with them? do we go through that? do we hold the data? mike: our fundamental work would suggest we will take out the

october lows. at a minimum, we will retest those lows. we still could have other policy supports. that could be a positive. we think the minimum we go to end those lows. our base case would be 3300. this is the best news i can give you. it's going to be early partly year. it's not going to be the second half of the year. if we make it that far, we probably did orchestrate a soft landing. earnings growth would come back up. guy: that timing is interesting. as ever, a fascinating note over the weekend. we always appreciate your time. mike wilson of morgan stanley.

still ahead it, targeting salesforce, we have more on the multibillion-dollar stake. what it means for the future of this camp and he. that's next. this is bloomberg. ♪

>> it's time for the bloomberg business flash. spotify is the latest company to cut jobs. streaming giant said it is cutting its base by about 6%. they have about 9800 employees. the stock had fallen at 58% since the end of 2021. microsoft is investing over several years in open ai, the research lab behind chat gb t. they are looking to tie text and image generating programs to its

own prox. microsoft said it was cutting 10,000 jobs. they would still invest in key areas. that is your latest business flash. alix: we want to get to the start up and cover the top tech stories from the bay area. join us is ed ludlow. is all salesforce right now? ed: it's all salesforce. elliott management is taking an activist position in the company. it is a multibillion-dollar stake. the managing partner did not give specifics of the investment. he said they are looking forward to working with marc benioff to realize some returns, realize the value they think is there and that company. salesforce is a classic. it hit its peak in 2021 from a share price perspective.

it hired like crazy. m&a has been a big part of their story. activist look at how that has been pulled back. half the market capital wants to see returns. guy: that all sounds really nice. it's all going to be fantastic. really? is that really what we are after? i have to wonder, will benioff's head be on the block? ed: it's interesting, the limited reaction we've seen this morning. this is not a surprise given the trajectory of salesforce shares. star board came on in october and said something similar. the return it, the value proposition of the stock does not reflect the growth it is seen in the pandemic area. when i found surprising, it was

the tone. they think they will work with the activists. alix: elon musk is in court today. ed: we had our first taste friday where he basically said just because i tweet doesn't mean anyone takes it at full face value. it doesn't mean they act on it. we just got into the idea's tweets are just tweets. there was a package. the evidence will be emails in text with some of those investors who are going to take part. guy: i am wondering how he feels about the courts and the imagery of him. alix: alix: it wasn't bad. guy: it was ok. great stuff.

thanks very much indeed. we will talk macro policy. this is bloomberg. ♪ thanks to avalara, we can calculate sales tax automatically. avalarahhhhhh what if tax rates change? ahhhhhh filing sales tax returns? ahhhhhh business license guidance? ahhhhhh -cross-border sales? -ahhhhhh -item classification? -ahhhhhh does it connect with acc...? ahhhhhh ahhhhhh ahhhhhh alix: the s&p is up 0.8%.

abigail: we have a nice rally. this is a two-day rally. friday was a big rally and now we are hopping onto it. this year, 2023 is starting up pretty well. as for some the big movers on the day, and has everything to do with the tech heavyweights that are helping me s&p. apple is up 1.9%. barclays is positive on the chips. you can see salesforce up 3%. that is on the announcement that elliott is taking estate. things are turning around.

let's check in on the s&p 500. we've been following this for a while. the last year bear market, we have seen these tests of resistance. we are going back above resistance once again. the more that happens, it tells you the buyers have conviction. it suggests that the dow and some of the other indexes might see that happen for the s&p 500. despite the talk of the fed raising rates, one thing that could have to do with it, sometimes he investors looking for broad macro points. we have company after company laying off people. that is a negative for the people laid off, it could be a sign of investors that finally companies are making changes, that it could help their financial structure. it is counterintuitive, i've

seen this before. that's like the bad news. alix: they're not going to hire, they might not lay off. thanks very much. we will talk about that in just a moment with someone. let's go to the broader sense. the different into takers that are talking about recession, jp morgan had this chart. according to the farm, you've got seven out of the nine asset classes from high-grade bonds. they show less than a 50% chance of recession. julia coronado joins us. she is the president of the national association for business economics. we will get to that in just a moment. when you look at the different data points, is that true? are we pointing to a world will be may not get a recession? julia: it is a greater

likelihood than it seemed a few months ago. the main driver is the supply side of the economy is functioning better. many indicators confirm that we are finally recovering from some of these disruptions that we experienced over the last couple of years. that is allowing inflation to moderate without a lot of layoffs. it is delivering more of a recovery and purchasing power. all of that is good news and suggests the likelihood we can achieve a soft landing has gone up. guy: good morning. history would not be on my side were i to suggest the soft data we are seeing does not lead to the hard data. we've got very bad soft data at the moment. does the hard data head in the same direction?

juliet: the answer is sometimes it doesn't sometimes it doesn't. in particular, pmi's, if you think about what they measure, they are not well designed to capture actual growth. what we know we are in the midst of is a substantial and pronounced slowing and growth, from astronomical levels from a super red-hot recovery, we are cooling quickly down to something slightly below trend. naturally, those serving measures capture that quite significant change in environment. that doesn't change into hard data consistent with recession. those two things can be consistent with each other. >> the great survey you just did, if you have firms that feel like it's easier to get workers, they're not going to be hiring as many. is that a signal that the labor

market will get looser? will we see layoffs? juliet: it's possible we get layoffs. we are getting layoffs in the tech sector. they are substantial. so far, the claims data suggests those people so far are able to reallocate to other sectors relatively quickly. one thing we are hearing from firms this time around, which is a change, they are more reluctant to let workers go. they are going to be very strategic in their workforce management. they are not going to quickly turned to layoffs as soon is revenues get squeezed. they are going to hold onto those workers because it was so hard to staff up in the last couple of years. they are going to be more reluctant to turn to layoffs. that could be a source of

resiliency for the economy. guy: we will let you have a little stab at the question of the day. can you have an urgings -- earnings recession without a labor recession? juliet: it's possible. if companies are pricing more consumer since flowing topline growth, if they absorb narrowing marriage and's in order to hold on to their workforce, it's not a spot management of your workforce. you could see profits get squeezed. you could see a decline in profits this year. you could still seat resiliency in the job market. so pharma -- far, that's what we've seen. alix: what kind of economy do we look at on the other? juliet: one of the things that

depends on is productivity. productivity in the last couple of years has been abysmal. the high turnover we've seen as it to productivity. there are all of these incentives that firms have to improve it. if we see a burst of productivity, that could take us to a second leg of this expansion. there are reasons for optimism. the analogy here would be the mid 90's cycle, where the fed hike rates very quickly. we saw a burst of productivity open up a second leg of the expansion. that's an optimistic take on what is possible this year. guy: let's take the other side of the coin. let's say we don't get that productivity push.

at the beginning of the next cycle with a strong labor market, that would lead to more tightness in the labor market. juliet: i don't we have central banks that are going to tolerate that. if there are indications that inflation and the fed has its eye on service sector wages and inflation, they are going to keep hiking. if we still have that underlying inflationary push, i think we are talking about another leg up in interest rates. another leg down and growth and the growth rates we are running at will be declining growth. these are very even odds i would

say. alix: we talked to mike wilson earlier. his base case is 3333 for the s&p. based on how you view the economy right now, where is the biggest mispriced in the market? juliet: that's a good question. i do think that long rates have rallied a bit hard right now. maybe they will go up on an optimistic scenario. i tend to put a little bit more weight on that soft landing scenario. you are going to have more pain. there is some optimism around the housing. if the fed is able to pause, we are talking about a level of interest rates that is double what it was in recent years for

things like mortgages. i think there is more repricing to come. even in a good scenario. the reality is why should house prices be so much higher now than they were pre-pandemic when rates and -- are going to be higher for a while. alix: i am trying to sell an apartment. good to see you. thank you very much. coming up, a record $16 billion in profits. we are going to break down the details next. this is bloomberg. ♪

>> ♪ keep it up-to-date with news from around the world, in california, 40's are trying to figure out the motive for a mass shooting at an asian community near los angeles. people were killed when a gunman opened fire in a ballroom. the suspect is described as an asian male who was found dead. poland will ask a germany commission to send its leopard tanks to ukraine. the foreign minister said it would not stand in the way. in france, the government is moving ahead with its pension reform plan. the proposal would raise the minimum retirement age from 60 to 64. one million people took to the

streets to protest the plan. global news 24 hours a day, on air and on bloomberg quicktake, powered by 2700 journalists and analysts in more than 120 countries. this is bloomberg. this is bloomberg. alix: citadel made a record $60 million in profits for clients last year. this is the largest return, surpassing the 15 billion back in 2007. join us is our wall street correspondent. >> the main fund is everything from macro to commodities to equities. the fact that citadel was able to do better than most people, it lost 12% last year. it's the worst market we've had in many years. remember, said adult the heartbeat of it.

people that focused on quantitative strategies also did well. i really have to point out here that $16 billion return. the trade was really a one large bet that john paulson had made. the net gains are $66 billion. that is well above what bridgewater has had. it's not even one amazing year that can griffin had. the market maker was a blow year. he is also over time now surpassing bridgewater i the numbers when it comes to dollars. guy: what is the structure on this fund? >> they starch more for members. the structures will vary. i would also say they vary

across semesters. something to watch is not just the funds. also the different kinds of funds that are being discussed four counts. how much leverage citadel has on something like this. alix: certain hedge funds well. will this continue? will that continue to happen? if you do clots, you are in good shape? >> citadel didn't make all of its money in equities. if you look at the strategies in the tech industry at large, most of them were in the red. the only one with double digits according to our indices is the commodity fund. things are going to have to change this year. something that is interesting is moving away from citadel for a

second. if you are a value investor. you are still in the early innings. i think very interesting is not just to made money. think about chris home, who lost money for the first time in more than a dozen years. he had the worst year since 2008. to some of the strategy start to come back. that wasn't a strategy last year that got you a lot of money. do you start to see more strategies that focus on concentrated bets start to come back as the markets become more interesting? guy: these are all big funds. how important is scale right now? if you're looking to put work --

money to work and had fun, is the equation fairly simple? >> i was talking how citadel has multiple funds to invest in. this long-term trend toward multi-strat with many types of strategies has been where the industry has been moving it. there is good reason for it. it's that nimbleness in the strategy, the ability to take risk and your investors trusting you more. citadel is an interesting example. the person who is the number two is tableau. he came from goldman sachs. it starts to give you different forms of talent that lend itself to that multi-strategy model.

who moves from the buy side this year is of high interest to a lot of the industry. last year, we knew it was going to be a tough year for a lot of hedge funds. we knew they were doing with the talent pool. it is starting to shake out who is making this market. things only matter when you looking at returns past one year. guy: it's amazing, isn't it. that is something you need to really think about. does it do what it says on the tenant? coming up, president biden wrestling with increasing political fallout after documents were found at his private home in delaware. more on that story next.

this is bloomberg. ♪

>> more documents containing classified information at resident bidens home. there are notes from his time in the senate and vice presidency. here is our white house correspondent. >> another batch turned up this weekend. an fbi search that lasted 12 hours at the president's home in delaware. they found six documents. this adds to the drip drip feed of documents we've seen coming from the president. as you mentioned, it was from his time at the senate. obviously, this is going to be a huge headache. they really have tried to

compare themselves differently and draw that line of how they are dealing with this different than the former president. when it keeps becoming headlines, that makes it more difficult, especially as this president could launch is only 24 bid. guy: it does feel one cancels the other one out. the republicans can't go after the democrats and the democrats can't go after the republicans. >> may be. that's not how it's being seen in washington. what you have over the weekend is republicans and even a democrat, the senate majority whip dick durbin is out saying this is embarrassing. this should be happening. not everyone is going to see it as they cancel each other out. this is not a top priority for the american people. a lot of polls will show you that. it is a priority at this moment

for republicans. alix: even democrats are critical over this. we have some shakeups in the white house. how many more shakeups do we see as we geared toward 2024. >> people close to biden is he is on his way out. you will have individuals on the screen. this is normal. these jobs are incredibly taxing on an individual's life. it is normal to have a shakeup after midterm elections. it likely could be a little bit more difficult as they are trying to launch the 2024 bid. it the documents and a fight with congress about the debt

ceiling. guy: it's certainly busy. great stuff as ever. let's talk about the markets. we are coming into the end of the day here in europe. european stocks continue to push higher. we are up by another 0.5%. i will show you thighs -- those in just a moment. we are trading quite close to it. the italian yields, we see them moving a little bit. you have had a lot of hawkish speeches coming through from the ecb. we will talk about that in the next hour as well. the impact of the iri having in your. the director general will be join us. we show that meeting over the

weekend. we are talking about this. it's a big subject in europe. this is bloomberg. ♪ these days, our households depend on the internet more and more. families grow, houses get smarter, and our demands on the internet increase. that's why we just boosted speeds for over 20 million

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guy: european stocks are a session highs. rent looks good. it is monday 23rd of january. the countdown to the close starts now. ♪ >> the countdown is on in europe. this is "bloomberg markets: european close" with guy johnson and alix steel. ♪ guy: here we go. this monday, this is what the session looks like. technologies are the top. chemicals are at the bottom. margin warning in one key chemical company out of europe may set the t