What if the US peacetime deficit tops 9% of GDP?
A peacetime deficit above 9% (recession plus tax cuts) is a bear-steepener with a fiscal-premium twist: long yields rise on supply even as growth weakens, gold and BTC bid on dollar-debasement fears while rate-sensitive tech de-rates. Rhymes with 2020's COVID deficit blowout, though that came with QE that suppressed yields — the difference now is term premium having to clear the supply. The forward angle: a deficit this wide without offsetting QE is the genuinely new setup, so the long-end and dollar downside skews larger than the 2020 template.
how we built this number — every step
The class rate is measured from our dated, sourced event library (decade-normalized Poisson — the full table is public at base_rates.json). The variant’s share within its class is the analyst’s editorial call, published so you can audit it. A wider range means thinner precedent. Full recipe: methodology · scored at Reality Check.
The butterfly cascade
How this trigger trickles across markets, left → right — the root shock, its first‑order moves, then the ripple effects. Drag any node; tap a market for its real price history.
Resolution timeline — how this probability is moving
Our model's odds (gold) over time vs the crowd's (Polymarket, blue), from the past toward the 1–3 years horizon. Each dot is a real macro event that nudged the probability — green pushed it up, red pushed it down. Tap a dot for the source. The gold path is an illustrative reconstruction anchored to today's estimate — real dated events, not a live re-estimate history.
What it would mean
If this plays out, it is a risk-off shock. A recession-plus-tax-cut combination pushes the US deficit past 9% of GDP in peacetime. The trigger decomposes into signed root‑shocks — Dollar/reserve confidence ▼ · Real yields ▲ · Recession signal ▲ — which propagate through our causal graph to the markets below.
If it happens — the markets it would move
Biggest moves first. Projected moves are cascade-model priors; hist A–B% = what comparable past events actually did (measured abnormal returns), and model prior · unmeasured marks markets with no analogue backing yet. Tap any market for its price history.
| Market | Class | Projected move | |
|---|---|---|---|
| 1 | MicroStrategy MSTRon Hyperliquid 📈 chart | Equity | ▲ +1.4% hist +0.47–+0.83% · other way +24.57% (n=12) |
| 2 | Gold XAUon Hyperliquid 📈 chart | Commodity | ▲ +1.1% hist +0.02–+1.52% · other way -0.17% (n=12) |
| 3 | Nasdaq 100 NDXon Hyperliquid 📈 chart | Index | ▼ -1.1% hist -0.82–-0.05% · other way -0.29% (n=12) |
| 4 | Tech sector XLK 📈 chart | Equity | ▼ -1.1% hist -0.9–+0.16% · other way -0.38% (n=12) |
| 5 | 30y Treasury yield DGS30 📈 chart | Rate | ▲ +11bp hist +2.71–+7.56% · other way +14.1% (n=12) |
| 6 | 10y Treasury yield DGS10 📈 chart | Rate | ▲ +9bp hist +2.63–+6.81% · other way +14.7% (n=12) |
| 7 | S&P 500 SPXon Hyperliquid 📈 chart | Index | ▼ -0.7% hist -0.26–+0.23% · other way +0.18% (n=12) |
| 8 | US dollar (DXY) DXYon Hyperliquid 📈 chart | FX | ▼ -0.8% hist -0.67–-0.17% · other way +0.7% (n=12) |
| 9 | Bitcoin BTCon Hyperliquid 📈 chart | Crypto | ▲ +0.7% hist -2.21–+1.4% · other way +5.56% (n=12) |
| 10 | Financials XLF 📈 chart | Equity | ▼ -0.6% hist -0.38–+0.03% · other way +0.21% (n=12) |
| 11 | EUR/USD EURUSDon Hyperliquid 📈 chart | FX | ▲ +0.7% hist +0.16–+0.57% · other way -0.53% (n=12) |
| 12 | Semiconductors SMHon Hyperliquid 📈 chart | Equity | ▼ -0.5% hist -0.72–+0.99% · other way +2.4% (n=12) |
| 13 | Coinbase COINon Hyperliquid 📈 chart | Equity | ▲ +0.5% hist -0.5–+1.71% · other way +18.8% (n=12) |
| 14 | GBP/USD GBPUSDon Hyperliquid 📈 chart | FX | ▲ +0.6% hist +0.14–+0.47% · other way -0.62% (n=12) |
Probable recommendation
Why we may diverge from history
Trust the cascade's SHORT on NVDA/AMD/SMH/TSM: their +4-8% history is AI-capex regime (2025 squeeze/Israel windows) plus the 2008/2020 crashes mean-reverting; a 9%-deficit yield shock hits multiples through a channel those analogues miss.
Historical precedent — what analogous events actually did
Across 40 analogous events (overlap‑weighted), as abnormal returns — market beta stripped, so it's the event's own effect, not the market backdrop. Shown at 20 days (persistent) and 5 days (immediate); ↺ fades = the two horizons disagree. Confidence = consistency × sample × significance.
| Asset | History says | Abnormal (20d · 5d) | Hit | n | Confidence | vs cascade |
|---|---|---|---|---|---|---|
| MU MU | SHORT | -5.4% · 5d -2.9% | 76% | 37 | 0.41 | ✓ matches cascade |
| SPX SPX | LONG | +0.4% · 5d -0.4% ↺ fades | 71% | 39 | 0.40 | ⚠ differs |
| JPM JPM | LONG | +0.4% · 5d -0.3% ↺ fades | 63% | 37 | 0.22 | ⚠ differs |
| ARM ARM | SHORT | -4.0% · 5d -5.0% | 65% | 20 | 0.21 | ✓ matches cascade |
| Gold XAU | LONG | +0.9% · 5d +0.1% | 61% | 36 | 0.18 | ✓ matches cascade |
| AMD AMD | SHORT | -0.3% · 5d -1.0% | 61% | 37 | 0.16 | ✓ matches cascade |
| XLF XLF | LONG | +0.2% · 5d -0.2% ↺ fades | 58% | 36 | 0.15 | ⚠ differs |
| KRW KRW | LONG | +0.2% · 5d +0.2% | 58% | 36 | 0.15 | ✓ matches cascade |
| EURUSD EURUSD | LONG | +0.2% · 5d -0.0% ↺ fades | 58% | 36 | 0.14 | ✓ matches cascade |
| High-yield credit HYG | SHORT | -0.2% · 5d +0.1% ↺ fades | 58% | 36 | 0.13 | ✓ matches cascade |
| 30y yield DGS30 | LONG | +2bp · 5d +2bp | 57% | 38 | 0.12 | ✓ matches cascade |
| TRY TRY | SHORT | -1.3% · 5d +0.9% ↺ fades | 58% | 36 | 0.12 | ⚠ differs |
| US dollar DXY | SHORT | -0.2% · 5d +-0.0% | 56% | 39 | 0.11 | ✓ matches cascade |
| CNY CNY | SHORT | -0.2% · 5d -0.1% | 56% | 36 | 0.11 | ⚠ differs |
Why this probability
9% peacetime deficit needs recession plus tax cuts; baseline ~6-7%, recession adds tail risk. A base‑rate‑anchored prior, continuously scored against what actually happens — not a forecast.