Key Takeaways
- Trump's 50% exit probability is a historic signal of sustained political risk, not a forecast.
- Markets see a 96% chance of a Fed hold and a 99% chance of no recession, painting a picture of macro stability.
- The 38% chance of a Kevin Hassett Fed nomination is a high-probability bet on a politicized central bank in 2026.
- Bitcoin mania has cooled, with tail-risk price bets given only a 1% probability.
- The core market tension is between calm macro fundamentals and volatile political expectations.
Executive Summary
Trading activity on Kalshi in late 2025 reveals a market narrative centered on political and monetary policy stability. With $9.8M in volume, the question of 'Donald Trump out this year?' trades at a coin-flip 50% probability, indicating deep uncertainty about the political environment but also a significant belief in his ability to serve through the end of the term. Meanwhile, macroeconomic markets show extreme confidence in a soft landing, with recession odds at just 1% and a 96% probability of a Fed hold in January 2026. The most intriguing divergence appears in Fed leadership speculation, where Kevin Hassett's nomination is given a 38% chance—a remarkably high level for a specific personnel decision. In contrast, Bitcoin price optimism has faded, with tail-risk bets above $130k at just 1%.
Analysis: Political Stability and the Presidential Market
The headline-grabbing market, 'Donald Trump out this year?' (50% probability, $9.8M volume), is a critical barometer of perceived political risk. A 50% probability is not a forecast of an event, but a reflection of a deeply bifurcated and uncertain information environment.
- Historical Context: Historically, markets on a sitting president leaving office early have remained at low single-digit probabilities outside of extraordinary circumstances (e.g., Nixon post-Watergate). A sustained 50% level is unprecedented in modern prediction market history, suggesting traders are pricing in a continuous state of elevated, non-standard political risk.
- Actionable Insight: This market is a pure volatility play. The equilibrium price suggests the market is struggling to process conflicting signals: robust institutional inertia vs. high-profile political and legal challenges. A move above 60% would signal a crystallization of belief in a near-term exit catalyst (e.g., a definitive legal or health event). A drop below 40% would indicate the market is discounting current noise as non-terminal. Traders should monitor this market as a leading indicator for political risk premiums across all asset classes.
- Key Catalysts & Risks:
- Upside (Yes) Catalysts: A definitive Supreme Court ruling enabling a consequential trial before year-end; a significant health event; a major bipartisan political development demanding resignation.
- Downside (No) Catalysts: The successful deferral of key legal cases into 2026; a clean bill of health from a routine medical exam; a sustained period of political 'calm' where opposition efforts appear fragmented.
This market’s high volume confirms it as the central political risk hedge for the period.
Analysis: Monetary Policy and Fed Leadership
The suite of Federal Reserve-related markets paints a picture of policy stasis but potential leadership turmoil.
Policy Stasis Confirmed:
The 'Will the Federal Reserve Hike rates by 0bps at their January 2026 meeting?' market at a 96% probability ($5.3M volume) is near-certainty. This aligns perfectly with the 'Will there be a recession in 2025?' market at a mere 1% probability ($4.7M volume). The narrative is clear: the Fed has engineered a soft landing and is now on an extended hold. The 'Will the Fed cut rates 2 times?' market at 6% probability further underscores that minimal easing is the base case.
- Actionable Insight: These are low-opportunity, consensus markets. The significant volume suggests they are being used as funding legs for more complex derivatives or as low-risk cash parking. The edge lies in the asymmetry of the 1% recession probability. While logically consistent with the Fed hold, any early Q1 2026 data hinting at contraction could cause this probability to spike dramatically, offering a high-risk/high-reward contrarian position.
The Hassett Conundrum – A Market Betting on Controversy:
The 'Will Trump next nominate Kevin Hassett as Fed Chair?' market at 38% probability ($5.0M volume) is analytically fascinating. This is an exceptionally high probability for a specific personnel pick, especially one that would represent a sharp departure from recent Fed chair precedent (Hassett is a former Council of Economic Advisers chair and a vocal Trump ally, not a monetary policy technocrat like Powell or Yellen).
- Historical Context: Powell's own renomination probability rarely exceeded 70% in the months leading to the decision. A 38% probability for a dark horse like Hassett is a substantial market bet.
- Actionable Insight: This market is likely pricing in two scenarios: 1) A political reward for a loyal ally, or 2) A strategic move to install a chair perceived as more amenable to executive influence or potential fiscal-monetary coordination. The complementary 'Powell leaves before 2026?' market at 1% probability confirms Powell is expected to serve his full term ending in early 2026. Therefore, the Hassett market is implicitly about the next nomination cycle in 2026. Traders long this market are betting on a political, rather than technocratic, succession.
- Key Catalysts & Risks:
- Upside (Yes) Catalysts: Public endorsements of Hassett by Trump or key cabinet members; speeches by Hassett aligning with Trump's economic priorities; any perceived cooling between Trump and other potential candidates (e.g., Waller).
- Downside (No) Catalysts: Hassett taking another administration role; Trump publicly praising another candidate; strong bipartisan statements favoring Fed 'independence' and a conventional candidate.
This 38% is a key volatility signal for bond markets, as a Hassett nomination would likely be interpreted as increasing the Fed's dovish and political bias, potentially steepening the yield curve.
Analysis: Asset Markets – Bitcoin and Sports
Bitcoin’s Faded Euphoria:
The two Bitcoin price markets ('$130,000 or above' and '$150,000 or above') both trade at a stark 1% probability with high collective volume (~$14.3M). This indicates that while capital remains interested in crypto, the extreme bullish narratives of late 2024/early 2025 have fully evaporated. The market is assigning a near-zero chance to a parabolic, cycle-topping move in the remaining weeks of the year.
- Actionable Insight: These are effectively lottery ticket markets. The 1% price may be slightly rich given the time horizon, suggesting some residual speculative bleed. A more informative market would be for a lower price target (e.g., $100k). The current data suggests traders see Bitcoin in a consolidation or distribution phase, not an acceleration phase.
NFL Futures as a Sentiment Mirror:
The high-volume NFL championship markets for San Francisco (6%, $9.6M) and New England (13%, $7.1M) are notable. Their volume rivals that of major policy markets. This likely reflects two factors: 1) The pure size of the sports betting market, and 2) These acting as popular, liquid proxy markets for general speculative activity. New England’s higher probability than the historically stronger San Francisco is the standout detail, possibly reflecting early-season performance data, key player acquisitions, or divisional strength assessments not captured in a generic analysis.
Synthesis and Cross-Market Implications
The composite view from these ten markets is one of macro stability paired with political and institutional uncertainty.
- The Trump/Hassett Nexus: The high probability on Hassett cannot be divorced from the 50% probability on Trump's tenure. The market seems to be saying: 'If Trump stays, the probability of a political Fed Chair nomination rises significantly.' This creates a coupled trade: a 'Yes' position on 'Trump out' should logically depress the Hassett probability, and vice-versa.
- The Policy Paradox: The near-certainty of a Fed hold (96%) and no recession (99%) presents a benign backdrop. However, the political markets (Trump, Hassett) suggest this stability is undergirded by volatile political foundations. This divergence is the core tension for 2026 outlooks.
- Risk Assessment:
- Base Case (60%): Trump serves, Powell chairs until 2026, policy on hold, no recession. Markets drift.
- Bull Case (20%): Political clarity emerges (Trump probability falls below 40%), Hassett speculation fades, soft landing consensus strengthens. Risk assets rally on lowered political risk premium.
- Bear Case (20%): Political risk escalates (Trump probability rises above 60%), triggering volatility that undermines the soft landing, potentially forcing the Fed into a politicized response. This could resurrect recession fears from their 1% grave.
Actionable Recommendations for Traders
- Monitor the Trump/Hassett Correlation: Establish a ratio to track the relationship between these two markets. A strengthening positive correlation would signal the market is increasingly pricing in a 'Trump-influence' outcome for the Fed.
- Use the Recession Market as a Canary: The 1% recession probability is an extreme. Consider a small, defined-risk long position as a hedge against Q1 2026 data shocks. This is a high-conviction, low-probability bet with a favorable payoff structure.
- Trade the Political Volatility Convergence: The 50% Trump market implies extreme volatility in that binary outcome. Options strategies (butterflies, calendars) in politically-sensitive sectors (defense, healthcare, regulated utilities) could be priced without this volatility, offering a relative value opportunity.
- Discount Bitcoin Tail Bets: The 1% for $130k+ is likely overpriced given the time decay. If seeking crypto exposure, these markets are not an efficient vehicle at these levels.
- Prepare for a Fed Narrative Shift: Build watchlists for asset sensitivity to 'Fed independence' headlines. A move in the Hassett market above 50% would be a major signal and could trigger a rapid repricing of long-duration Treasuries and the dollar.
Conclusion
Kalshi markets at year-end 2025 are dominated by a single, high-volume bet on continued political turbulence surrounding Donald Trump, which is then diffracting into expectations for unconventional Federal Reserve leadership. This political uncertainty exists in stark contrast to a serene macroeconomic forecast of no recession and steady monetary policy. For traders, the significant volumes in these political contracts indicate they are becoming institutional-grade hedging tools. The central trade of early 2026 will be determining whether the political noise remains contained, or whether it spills over to disrupt the consensus soft landing narrative. The 38% probability on a Kevin Hassett nomination is the clearest market signal that such a spillover is a meaningful risk.
Market Analysis
Trump out this year? ➡️
Current Probability: 50.0%
Extreme uncertainty. Not forecasting event, but pricing in continuous, elevated political risk. Key indicator for political risk premium.
Kevin Hassett as Fed Chair? 📉
Current Probability: 38.0%
Surprisingly high probability for a political nominee. Signals market sees meaningful chance of a departure from technocratic Fed leadership.
Fed 0bps Hike Jan 2026 ➡️
Current Probability: 96.0%
Policy stasis consensus. Market used as funding/cash parking. Low opportunity.
Recession in 2025? 📈
Current Probability: 1.0%
Extreme complacency. Asymmetric payoff opportunity as a hedge against early 2026 data shocks.