The odds of a 2025 recession soar over 50% on prediction markets after Trump’s “Liberation Day”
As global stocks sell off, platforms that trade event contracts like Kalshi and Polymarket signal that a recession is now more likely than not in America.
Yesterday, President Donald Trump finally unveiled the long-anticipated set of reciprocal tariffs, sparking a sharp decline in global markets this morning, with stocks selling off in Europe, Japan, and China. The US dollar is also getting hit hard, with the Dollar Index (DXY) — a broad measure of its strength against a basket of currencies — down 2% at the time of writing.
Analysts are expecting countries to retaliate in turn, with China already urging the White House to cancel its tariffs, vowing countermeasures to safeguard its own interests, per Reuters.
Prediction markets like Kalshi and Polymarket, which offer some basic level of price discovery (even on limited volumes) of what investors are expecting to happen, are seeing the odds of a US recession this year rise sharply on their platforms. On Kalshi, the market-derived probability rose to 54%. On Polymarket it jumped to 50%, up from 34% two weeks ago and from 20% at the start of the year.
The rising risk comes just a week after Goldman Sachs analysts pegged their own assessment of a US recession over the next 12 months at 35%, up from a previous estimate of 20%. Earlier this morning, Reuters also reported that Barclays analysts now “see a ‘high risk’ of the US economy falling into a recession this year.”
As markets digest the new global trade order, keep an eye out for movements in fixed-income markets today for clues on how institutional investors are positioning. As Sherwood News’ Luke Kawa flagged last week, investors are increasingly demanding a greater premium to lend to higher-risk companies — with high-yield credit blowing out to its widest spread against US Treasuries in six months.
And, of course, the stock market will tell us point-blank just how much of a shock these tariffs are. At the time of writing, SPDR S&P 500 Trust futures are down 2.8%. The more concentrated and tech-heavy Nasdaq 100, tracked by ETFs like the Invesco QQQ Trust, is down nearly 4%.
