Market Mood Swings: Recession Probability Slides to 22% on Polymarket

Imagine a pendulum swinging from fear to cautious hope. That’s the market sentiment we’re seeing right now—a stunning drop in U.S. recession probabilities reported by Polymarket, rebounding from nearly two-thirds to just over one-fifth.

Signal from the Crowd
Polymarket, a decentralized bet platform, now assigns only a 22–26% chance to a recession within the next twelve months—down significantly from highs above 60% during April.

What Triggered the Shift

• Trade Winds Calm: A reduction in tariff threats has helped ease pressure on global supply chains and business plans.
• Data Beats Expectations: Employment and consumer spending have outperformed forecasts, boosting investor morale.
• Fed Policy Support: The Federal Reserve’s cautious approach—signaling pause on rate hikes—has further underwritten optimism.

Investor Reactions & Risks

• Risk On: Stocks have rallied modestly as sentiment improved; safe-haven inflows have slowed.
• Cautious Watch: Investors still eye downside risks—including inflation, fiscal gridlock over the debt ceiling, and lingering geopolitical tensions.

Why It Matters
Prediction markets like Polymarket reflect real-time collective sentiment. A shift from 60% to 22% in recession odds suggests a substantial change in expectations—but also a reminder that risks have diminished, not disappeared.

Final Reflection
As recession fears recede, investors enter a delicate window: optimism tempered by prudence. Polymarket’s data offers a snapshot of both market confidence and remaining fragility.