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Markets Score 55 Neutral

Kalshi Recession Odds Rise to 28% in 2026; 2 ETFs for Downside Protection

Apr 02, 2026 18:58 UTC
^VIX, SPY, TLT
Long term

Kalshi's latest data shows a 28% chance of a 2026 recession, up from below 20% in February. Investors are advised to consider defensive ETFs like XLP and VPU to hedge against potential economic downturns.

  • Kalshi's 2026 recession probability is 28% as of April 1, up from below 20% in February.
  • A recession is defined as two consecutive quarters of negative U.S. GDP growth.
  • Fourth-quarter 2025 GDP was revised down to 0.7% in March 2026.
  • XLP and VPU are recommended ETFs for hedging against economic downturns.
  • XLP has gained 5% this year and is up 20% over five years.
  • VPU is focused on utilities, with over 62% in electric utilities.

The probability of a recession in 2026 has climbed to 28% as of April 1, according to Kalshi, reversing a decline from below 20% in early February. This increase follows a series of weak economic indicators and rising oil prices due to the Iran conflict. Kalshi defines a recession as two consecutive quarters of negative U.S. GDP growth, a scenario that has gained attention after the fourth-quarter GDP was revised down to 0.7% in March. While a shallow recession might not severely impact the stock market, investors remain cautious and are seeking ways to mitigate risk. Two exchange-traded funds (ETFs) have emerged as potential hedges: the State Street Consumer Staples Select Sector SPDR ETF (XLP) and the Vanguard Utilities ETF (VPU). XLP focuses on consumer staples, including retail, household products, and beverages, with major holdings like Walmart, Costco, and Procter & Gamble. The ETF has shown resilience, rising 5% this year despite broader market declines. VPU, heavily weighted toward electric utilities like NextEra Energy and Duke Energy, offers exposure to inelastic demand sectors. Both ETFs aim to provide stability in a downturn by targeting industries that remain essential during economic stress.

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