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Posted March 21, 2025 at 1:54 pm
Users of IBKR ForecastTrader should take advantage of the strange inconsistencies that at times appear on the platform. On the morning of March 21, we see that traders expect the US to experience recession by the end of Q2 2025 with a probability of 73%. A recession is defined as two consecutive quarters of negative GDP. Therefore, it must be that a negative GDP in Q1 2025 is at least 73% likely. But if you look at the question: “Will the annualized growth rate in US Real GDP exceed 0% in Q1 2025?,” you see buyers bidding $0.62 cents a contract. Now, it is clear that both events cannot occur at the same time with any probability and that means that buying the “NO” on both events at 28 and 39 cents, for a total of 67 cents, would result in one of the contracts paying back $1.00.
Source: ForecastEx
Note: Prices are highest bids as of the morning of March 21, 2025. A recession in ForecastTrader context is a technical recession featuring two consecutive quarters of real GDP contraction on an annualized basis, not an NBER recession.
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This material is from IBKR Macroeconomics, an affiliate of Interactive Brokers LLC, and is being posted with its permission. The views expressed in this material are solely those of the author and/or IBKR Macroeconomics and Interactive Brokers is not endorsing or recommending any investment or trading discussed in the material. This material is not and should not be construed as an offer to buy or sell any security. It should not be construed as research or investment advice or a recommendation to buy, sell or hold any security or commodity. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.
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Scenario: GDP growth Q1 is positive. GDP growth Q2 is negative. GDP growth Q3 is negative. GDP growth Q4 is positive. According to the definition being used, a recession has occurred. When was it experienced?
During Q2 & Q3 Jan. 25 thru June 25 – Isn’t Q1 of FY 25 already done and nearing the end of Q2? I’m going by the Federal FY calendar. Congrats for not politicizing your comment!
Very good point and proves that people that engage in these gamblings do so without minimum considerations. Also means that using the predictions to forecast anything is very unreliable. I personally think that the US is heading to a major depression for a dozen of reasons, but I don’t trade my opinions recklessness. So far betting against Tesla and the government has extremely profitable, but I keep strict money management in case it turns.