U.S. Recession Concerns Ease Amid Improved Financial Conditions

Concerns over a potential U.S. recession are waning as market optimism grows, driven by improving financial conditions and lessening trade tensions.

According to Polymarket, a digital asset prediction platform, the betting probability for a U.S. recession by 2025 dropped to 22% as of September 5. This represents the lowest level since late February, indicating a significant shift in sentiment.

Earlier this year, worries about a recession surged when the Atlanta Federal Reserve's GDPNow model forecasted a -1.5% contraction in first-quarter U.S. GDP growth. Anxiety deepened in March with the Trump administration's tariff policies, escalating market concerns. Additionally, the Federal Reserve's slowdown in the pace of its balance sheet reduction signaled potential caution regarding economic growth.

In response, major Wall Street institutions such as Goldman Sachs and JPMorgan warned of a higher risk of recession. Goldman Sachs notably estimated a 45% probability of a U.S. recession within 12 months. Consequently, Polymarket's recession probability bet soared to a peak of 66%.

However, the outlook began to improve in June as trade discussions between the Trump administration and China advanced, reducing market uncertainty. Goldman Sachs subsequently revised its recession forecast, lowering the probability to 30% and adopting a more optimistic view of U.S. economic resilience.

This renewed confidence underscores how a combination of better financial conditions and reduced trade friction has positively influenced both public and institutional perspectives on the U.S. economic outlook.