Consumers may feel pinched by higher prices, but new data is painting a strong economic picture for the coming year. Recession odds for 2026 have fallen to a new low of 25 cents, down from 42 cents in July.
The drop comes after a new Commerce Department report showing that the gross domestic product (GDP) grew to 4.3% in the third quarter of 2025, beating expectations. The news may have given traders more faith in the strength of the U.S. economy heading into the new year.
GDP growth
Traders currently forecast GDP will cool in Q4, but will likely stay above 2%. GDP for 2025 is also likely to remain above 2% with a current market forecast of 2.3%.
This represents a sharp turnaround from the first quarter, when the economy shrank by 0.6%.
Consumers are concerned
Despite the positive economic data, confidence among consumers remains low, and traders share similar concerns about rising inflation and the labor market.
The nation’s consumer price index remains elevated. It is projected to end the year at 2.8%, well above the Federal Reserve’s goal of 2%. Meanwhile, November’s unemployment report rose to a four-year high of 4.6%.
While GDP growth expectations are rising, inflation concerns persist. As Kiplinger’s David Payne noted, price increases for food, homes, and electricity “continued their upward march,” even if overall inflation was lower than expected.
The takeaway:
Kalshi markets now forecast:
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