Polymarket bets 10% on US recession as analyst questions rate cuts

Polymarket, a leading prediction market, along with CME’s Fedwatch tool, suggests that a rate cut during the upcoming September Federal Open Market Committee (FOMC) meeting is highly probable.

Despite this, Garry Evans, BCA Research’s chief asset allocation strategist, remains unconvinced that such a cut will stave off a recession in the United States. 

While Evans and other analysts foresee economic challenges ahead, Polymarket bettors are only assigning a 10% chance that a recession will occur in 2024.

CME’s Fedwatch tool currently gives a 76% probability of a 25 basis points (bps) rate cut at the September FOMC meeting. 

However, Evans argues that even if the Federal Reserve reduces rates, it may not be enough to prevent a downturn. 

Speaking to CNBC, Evans remarked, “Every single one of us now believes there’s a recession, and that’s exactly the opposite of what the market believes. There’s a very strong narrative out to the market that we’re facing a soft landing. We don’t believe that. We see signs that the economy is turning down.”

Recent indicators, such as the Sahm Rule, known for its accuracy in predicting recessions, have begun signaling potential economic trouble. 

Evans is not alone in his concerns; figures like Robert Kiyosaki, author of “Rich Dad Poor Dad,” and economist Peter Schiff have also issued warnings about the U.S. economy, predicting possible crises for the U.S. dollar and the broader economy.

Despite these cautionary signals, Polymarket bettors remain skeptical that a recession will occur this year. 

A wager totaling $205,491, set to expire on December 31, 2024, is based on the stipulation that a recession will be declared only if the Bureau of Economic Analysis (BEA) reports two consecutive quarters of negative GDP growth within the calendar year. 

Currently, bettors are placing the odds of this scenario at just 10%, reflecting a general belief that the U.S. economy might avoid a recession in 2024 despite the looming risks.