Prediction market bettors on Polymarket are painting a surprisingly optimistic picture of the U.S. economy, having significantly downgraded the likelihood of a recession in 2024.

What Happened: According to the latest data, the market now estimates just an 7% chance of an economic downturn this year, representing a significant decrease from the 32% chance at the start of August.

The Polymarket chart shows a clear downward trend in recession probability over the past week, with the line graph steadily declining from early August to Aug. 15.

This shift in sentiment among bettors suggests growing confidence in the economy's resilience.

With $158,294 wagered on this outcome, the market's current prices offer 7 cents for a "Yes" bet on a recession and 94 cents for a "No" bet, further underlining the strong conviction against an economic contraction.

This bullish outlook from Polymarket participants aligns with recent positive economic indicators.

The U.S. Census Bureau reported July retail sales surging by 1.0% month-over-month, significantly outpacing the estimated 0.4% and the previous month's stagnant performance, according to data.

Core retail sales also showed robust growth at 0.4%, exceeding expectations.

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Why It Matters: Despite the optimism reflected in Polymarket bets and retail data, the Federal Reserve maintains a cautious stance.

St. Louis Fed President Alberto Musalem recently hinted at a potential policy shift, noting that the labor market is no longer overheated and that inflation risks have decreased.

This sentiment is mirrored in various market indicators tracked by Goldman Sachs (NYSE:GS), which generally show low recession probabilities across different metrics.

However, economists remain vigilant, aware that historical patterns sometimes show recessions following periods of apparent economic strength.

The combination of Polymarket's low recession odds and strong retail sales figures presents a picture of economic resilience.

However, inflation concerns persist, keeping Federal Reserve policymakers on alert as they continue to closely monitor economic data.

As 2025 approaches, market participants, policymakers and economists will be watching closely for any shifts in these trends.

While Polymarket bettors and recent data suggest a positive outlook, the economic landscape remains dynamic, and the situation could evolve as new information emerges.

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