After A 4.3% GDP Boom, Traders Bet US Economy Cools Next

The U.S. economy just delivered a blockbuster third quarter, but traders are already betting that the pace will start to cool sharply.

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Prediction markets reacted quickly after the stronger-than-expected growth data, raising wagers on slower growth in the fourth quarter and potentially into 2026 despite the headline surprise.

Gross domestic product expanded at a 4.3% annualized pace in the third quarter of 2025, crushing expectations of 3.3% and accelerating from 3.8% in the second quarter.

It was the strongest growth reading since the third quarter of 2023.

History offers a warning: blockbuster quarters rarely repeat.

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Do Blowout GDP Quarters Usually Fade?

Blowout GDP prints have often been followed by weaker growth in subsequent quarters.

After the economy grew 4.7% in the third quarter of 2023, growth slowed to 3.4% in the fourth quarter and then slipped to just 0.8% in the first quarter of 2024.

Before that, the eye-popping 7% post-pandemic expansion in the fourth quarter of 2021, fueled by reopening momentum and policy stimulus, was followed by a 1% GDP contraction in the first quarter of 2022.

"The economy is demonstrating a Goldilocks scenario with above-potential U.S. economic growth, and declining but elevated inflation and a less robust labor market," Eric Teal, chief investment officer for Comerica Wealth Management, said.

He said consumer spending remained strong due to the wealth effect from higher asset prices and said the Federal Reserve is likely to maintain a dovish bias.

Teal cautioned that further rate cuts could push long-term bond yields higher and weaken the dollar.

He also flagged immigration trends as a potential headwind.

"The collapse in immigration does suggest slower growth ahead and increased pressure on wages," Teal said, adding that hiring has been weak in industries dependent on immigrant labor and retail sales have softened in border states.

What Are Prediction Markets Signaling?

On Polymarket, odds on U.S. growth landing between 2% and 2.5% in the fourth quarter rose to 20% on Tuesday, up from 17%.

Bets on growth below 1% also climbed, rising two percentage points to 14%.

At the same time, conviction around another blowout quarter faded. The probability of fourth-quarter growth above 3.5% dropped to 10%, down three percentage points on the day. Odds of growth between 3% and 3.5% also stand at 9%.

What About Recession Risks and Rate Cuts?

Despite the hotter-than-expected GDP data, bets on a recession in 2026 barely moved. The probability of a 2026 recession held around 28%, unchanged on the session, after it had already slipped from nearly 35% in recent weeks.

On Fed monetary policy, bettors continue to see multiple rate cuts ahead.

The most likely outcome priced by traders is three rate cuts in 2026, with a 23% probability. A two-cut scenario follows closely at 22%.

Fed futures broadly echo that view, fully pricing in two cuts and assigning roughly a 12% chance of a third by the end of 2026.

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