The prediction market Polymarket and CME’s Fedwatch tool suggest that a rate cut during the Federal Open Market Committee (FOMC) meeting in September is highly likely. However, BCA Research’s chief asset allocation strategist, Garry Evans, argues that even if rates are lowered, it won’t stop a recession in the United States. On the flip side, Polymarket bettors are giving just a 10% chance of a recession happening in 2024.
September FOMC Rate Cut Likely, but Recession Fears Persist
There’s a good chance the U.S. Federal Reserve will slash the federal funds rate at the September FOMC meeting and the chances of a 25 basis points (bps) slash is the most likely. CME’s Fedwatch tool gives the 25bps odds a 76% chance as of Aug. 25, 2024. However, while rate cuts may be on the cards, BCA Research’s chief asset allocation strategist, Garry Evans believes the cuts won’t help avoid a recession.
Speaking with the news outlet CNBC Evans stated:
Every single one of us now believes there’s a recession, and that’s exactly the opposite of what the market believes. There’s a very strong narrative out to the market that we’re facing a soft landing. We don’t believe that. We see signs that the economy is turning down.
Recent indicators, such as the Sahm Rule, which is known for its accuracy in predicting the signs of a recession, have started to blink red. Garry Evans isn’t alone in raising concerns about a potential U.S. economic slump.
Polymarket bet on Sunday, Aug. 25, 2024.
This week, “Rich Dad Poor Dad” author Robert Kiyosaki took to X to caution about the state of the U.S. economy. Meanwhile, Peter Schiff has also issued a warning, predicting a looming crisis for the U.S. dollar and an economic collapse on the horizon.
Despite the warnings and signals, polymarket bettors are not convinced that the U.S. will slide into a recession this year. A $205,491 wager, set to expire on Dec. 31, 2024, carries a stipulation that states, “This market will resolve to ‘Yes’ if the Bureau of Economic Analysis (BEA) reports two consecutive quarters of negative GDP growth in the United States within the calendar year 2024, based on the seasonally adjusted annual rate.” Currently, however, bettors are placing the odds at just 10% for this scenario playing out within the year.
