Bets on a U.S. recession in 2025 have dropped sharply, with odds on crypto prediction platform Polymarket sinking to 22% this week, the lowest level since late February.
Recession fears ballooned earlier this year when the Atlanta Federal Reserve’s GDPNow indicator predicted a 1.5% contraction for the first quarter of the year, while the actual fall was softer at 0.5%.
Tensions escalated in March as U.S. President Donald Trump announced a series of reciprocal tariffs on what he branded “Liberation Day,” rattling investors already wary of a slowing economy. The Fed’s decision to slow the pace of shrinking its balance sheet added fuel to concerns.
By April, Wall Street giants like Goldman Sachs and JPMorgan were raising red flags. Goldman put recession odds at 45% at the time, and Polymarket odds climbed as high as 66%. Another spike came in May after former U.S. Treasury Secretary Janet Yellen warned that Trump’s tariffs could have a “tremendously adverse” effect on the economy.
Yet behind the headlines, negotiations with China progressed. The market coined the so-called TACO (Trump Always Chicken Out) trade, referencing the U.S. President’s negotiations pattern, where tariffs are announced but then reversed.
Goldman Sachs cut its 12-month recession odds to 30% last month, reflecting a more optimistic outlook as financial conditions eased and trade threats receded.
Whether a recession hits in 2025 remains uncertain. On Polymarket, a recession bet pays out if the National Bureau of Economic Research declares one or if the U.S. posts two straight quarters of negative GDP growth.