The perceived likelihood of the United States entering a recession in 2025 has notably diminished, according to recent insights from the prediction market platform Polymarket. This significant shift signals burgeoning market confidence in a “soft landing” trajectory for the U.S. economy, a marked departure from the heightened anxieties observed just months prior.
- The probability of a U.S. recession in 2025 has significantly declined.
- Recession concerns peaked between late March and mid-May, with probabilities exceeding 60%.
- By mid-June, the probability plummeted below 30%, stabilizing at 22% in early July.
- This shift is attributed to robust labor markets, resilient consumer spending, and improving inflation.
- The data is based on over $8 billion in traded volume on Polymarket.
Insights derived from Polymarket’s extensive trading volume, exceeding $8 billion, illustrate a period of escalating concern regarding an economic contraction between late March and mid-May. During this timeframe, the implied recession probability surged above 60%. This surge in apprehension was primarily attributed to persistent inflationary pressures, a softening in industrial output, and the Federal Reserve’s cautious posture on interest rate adjustments. Nevertheless, a gradual yet decisive reversal in sentiment commenced in June, driving the probability below 30% by mid-June, and subsequently stabilizing at its current level of 22% in early July.
Underlying Economic Factors and Shifting Sentiment
This diminished likelihood of a recession underscores a burgeoning conviction in the economy’s capacity to moderate its growth without tipping into a technical downturn. Several fundamental factors are underpinning this renewed optimism: robust labor market indicators, sustained consumer spending, and improving inflation metrics. While certain sectors, particularly housing and manufacturing, continue to navigate challenging conditions, the wider market appears to interpret recent policy adjustments and corporate earnings reports with measured optimism, rather than viewing them as precursors to an imminent economic contraction.
The trajectory of market sentiment over the course of the year vividly illustrates the persistent macroeconomic uncertainty. Beginning with a probability below 10% in early January, recession concerns escalated sharply through March and April, only to undergo a dramatic reversal in June and early July. This inherent volatility underscores the fluid and often unpredictable character of economic expectations. With the Federal Reserve’s next interest rate decision on the horizon and the commencement of the third-quarter earnings season, investors and traders are poised to remain vigilant for additional signals of economic resilience or the potential resurgence of contractionary pressures.

Michael Carter holds a BA in Economics from the University of Chicago and is a CFA charterholder. With over a decade of experience at top financial publications, he specializes in equity markets, mergers & acquisitions, and macroeconomic trends, delivering clear, data-driven insights that help readers navigate complex market movements.