Analysis of high-volume markets suggests political volatility is priced as the dominant macro risk for 2025, eclipsing economic and monetary policy concerns.
The current prediction market landscape presents a stark dichotomy. Political and institutional stability—specifically surrounding the presidency of Donald Trump—has emerged as the primary focal point for traders, commanding significant volume and mid-range probabilities. This contrasts sharply with markets concerning traditional macroeconomic drivers (recession, Fed policy, Bitcoin price extremes), which are trading at deeply suppressed probabilities (<10%). The standout signal is the 'Donald Trump out this year?' market at Kalshi, priced at a 50% probability with nearly $9.8M in volume. This indicates that the market assigns a substantial and liquid risk premium to the possibility of a presidential departure in 2025, a non-trivial event that would reshape all subsequent policy timelines. Concurrently, related policy markets, such as the nomination of Kevin Hassett as Fed Chair (38%), show positioning for specific Trump-administration actions. Our analysis concludes that for the 2025 trading horizon, political narrative risk is paramount, while consensus expects economic 'soft-landing' continuity and incremental monetary easing.
The 'Donald Trump out this year?' market (Kalshi) is the most significant single signal in our dataset. At a 50.0% probability and $9.8M in volume, it reflects a deeply divided market with substantial capital on both sides. This is not a tail-risk bet; it is a core risk being priced as a coin flip.
Historical Context & Catalysts: Historically, markets pricing presidential departure risk have spiked during periods of acute political crisis (e.g., impeachment proceedings) but rarely sustained levels at parity for extended periods. The current pricing suggests a market perception of multiple, non-mutually exclusive pathways:
Actionable Insight: The 50% level represents a key pivot. A rise above 55-60% would indicate a market consensus forming around a near-term catalyst (e.g., health event, seismic political scandal). A decline below 40% would suggest fading of immediate transition risks. Traders should monitor this market as a leading volatility indicator for all other policy-dependent contracts. A 'Yes' resolution would trigger immediate repricing in succession-related markets (Vice Presidency), Fed leadership, and all 'before Jan 1, 2026' policy markets.
Flanking the central presidency market are contracts on specific administrative actions. Their probabilities provide a blueprint of market expectations for a functioning Trump administration.
Key Market: 'Will Trump next nominate Kevin Hassett as Fed Chair?' (Prob: 38.0%, Volume: $5.0M) This is a high-conviction policy bet. Kevin Hassett, former Chair of the Council of Economic Advisers under Trump, is a known quantity with expressed policy views. A 38% probability indicates he is considered the frontrunner, but far from a sure thing. The market is likely weighing:
Key Market: 'Will the Department of Education be eliminated before Jan 1, 2026?' (Prob: 1.0%, Volume: $3.9M) Despite being a stated GOP and Trump policy goal, the market assigns a near-zero probability to its occurrence within the next year. This 1% price is a powerful signal that the market views this as logistically and legislatively implausible in the short term, even with unified Republican control. It would require passing major legislation through a likely closely-divided Senate. This market acts as a useful sanity check against over-pricing radical policy shifts.
Trading Implication: The disparity between the Hassett nomination (38%) and Education elimination (1%) is instructive. Markets are pricing a higher likelihood of personnel changes within existing institutions than the wholesale dismantling of those institutions. This favors contracts on appointments over contracts on structural dissolution.
Traditional macro risks are trading at depressed levels, indicating a consensus expectation of stability.
Key Markets:
Actionable Insight: These markets present asymmetric opportunity. Any significant deterioration in labor market or inflation data could cause a violent repricing in the recession contract from 2% upward. Similarly, a dovish Fed pivot could spike the probability of 2+ cuts. These are cheap hedges against a break in the current economic consensus.
High-volume markets on Bitcoin and sports, while not directly political, offer insight into broader risk sentiment.
Bitcoin Markets: The two 'How high will Bitcoin get this year?' contracts ($130K+ at 1.0%, $150K+ at 1.0%) with combined volume over $14M reflect massive trading interest but a skeptical outlook on parabolic price moves in 2025. The market is effectively pricing out a repeat of 2024's ETF-driven euphoria in the near term, suggesting a consolidation or correction phase is anticipated.
NFL Championship Markets (2026): The Philadelphia (10%) and Los Angeles R (14%) contracts are efficient. These probabilities align roughly with top-tier championship odds at the start of a season, indicating a relatively efficient sportsbook-style market. The high volumes ($5.6M and $4.2M) likely reflect fan engagement and proprietary models rather than political insight.
Sentiment Reading: The Bitcoin pricing suggests a cautious, non-speculative mood among a segment of traders, which contextualizes the heavy hedging seen in political volatility markets.
Base Case (60% Confidence): Political noise without regime change. Trump remains in office, pursuing a mix of executive actions and limited legislative wins. Powell serves out his term, with modest rate cuts in late 2025. No recession. Hassett is nominated in 2026. In this scenario, the 'Trump out' market falls to 20-30%, Hassett market rises to 50-60%, and recession/Fed cut markets drift slightly higher but remain sub-15%.
Bear Case / High Volatility Scenario (30% Confidence): A political or health crisis triggers a succession event. The 'Trump out' market resolves YES. This leads to massive repricing: a President Vance (or other successor) would have different policy priorities, jeopardizing the Hassett trade and potentially altering fiscal and regulatory trajectories. Macro markets would spike in volatility due to uncertainty.
Tail Risk (10% Confidence): An external shock (geopolitical, financial) forces a economic hard landing, spiking recession probabilities above 50% and forcing aggressive Fed easing, regardless of politics.
Recommended Action:
Prediction markets are sounding a clear alarm for 2025: political instability is the new macro. While economists forecast steady growth and a patient Fed, traders are allocating millions to bets on whether the president will finish the year. This divergence is the central trading dynamic. The 50% probability on a presidential departure is a striking statistic that cannot be ignored; it reflects a priced-in expectation of unprecedented political volatility. Successful navigation of this environment will require layering traditional economic analysis with acute political risk assessment, using the high-volume, liquid contracts on Kalshi as a real-time barometer for regime stability. The actionable edge lies in understanding the linkages between the presidency market and its satellite policy contracts, where mispricings will emerge if the consensus on stability shifts.
Current Probability: 50.0%
The anchor market. A move above 55% signals growing consensus on a near-term catalyst; a drop below 40% indicates stability expectations returning.
Current Probability: 38.0%
High-conviction policy bet. Likely to rise if Trump's policy staff coalesces around Hassett. Vulnerable to negative Senate signaling.
Current Probability: 2.0%
Extreme consensus against recession. Highly sensitive to negative NFP or consumption data. Offers convex payoff.
Current Probability: 6.0%
Priced for a cautious Fed. Probability could jump on a single dovish CPI print or unemployment tick-up.