U.S. Recession Odds Drop to 22% on Polymarket as Trade Tensions Ease

Bets on a U.S. recession in 2025 have plummeted to 22% on crypto prediction platform Polymarket, marking the lowest level since late February. The decline follows cooling trade tensions and a softer-than-expected economic contraction earlier this year.

Earlier fears were stoked by the Atlanta Fed's GDPNow indicator forecasting a 1.5% Q1 contraction, though the actual dip was just 0.5%. Markets further wobbled in March when former President TRUMP announced retaliatory tariffs, coinciding with the Fed's decision to slow balance sheet reductions.

Wall Street's alarm bells peaked in April, with Goldman Sachs placing recession odds at 45% and Polymarket traders pushing probabilities to 66%. Janet Yellen's May warning about tariff impacts briefly reignited concerns. But behind the scenes, progress in China negotiations and the market's 'TACO' (Trump Always Chicken Out) narrative—referencing tariff reversals—helped restore confidence.

Goldman Sachs has since trimmed its 12-month recession forecast to 30%, reflecting eased financial conditions and receding trade threats. The Polymarket's current 22% odds suggest traders increasingly view the U.S. economy as resilient despite earlier turbulence.