May 25, 2026

Here's what we've got this week:

Trump says the Iran deal is "largely negotiated." 33 ships transited Hormuz over the weekend, up from 8-10 last week. Multiple Polymarket contracts could resolve fast.

• Thursday is brutal — Q1 GDP second release, PCE inflation, durable goods, and initial claims all hit at 8:30 AM ET

• ️ Senate Republicans are in open revolt over Trump's $1.8B "ballroom" and ICE funding. Government shutdown odds may need a rerate.

Memorial Day Monday means a shortened trading week, but the calendar still delivers a heavy load Tuesday through Friday. The macro story is dominated by Thursday's data dump — Q1 GDP second release, April PCE inflation, durable goods orders, and initial claims all drop at 8:30 AM ET in what's effectively a four-data-point referendum on whether the Iran oil shock is finally cooling. The geopolitical story shifted over the weekend, with Trump announcing the framework of an Iran deal and Iranian state media partially confirming it. The political story is the GOP civil war in the Senate, which is now spilling into the ICE funding fight and threatening another shutdown showdown. And the primary calendar starts heating up with Iowa next Monday.

The market: US x Iran permanent peace deal markets, Strait of Hormuz reopening Platform: Polymarket Current odds: Repricing in real time after weekend announcements Volume: Heavy across all Iran-related contracts

Why it matters this week: Trump announced Friday on Truth Social that a deal with Iran is "largely negotiated," following talks with Israel and other allies. Iran has not officially confirmed the deal, and state media contradicted parts of it, but the on-the-ground reality is shifting fast. According to Fars news citing the IRGC Navy, 33 ships transited the Strait of Hormuz with Iran's permission over the weekend — a massive jump from the 8-10 ships per week the strait was averaging earlier this month. Secretary Rubio is in New Delhi laying out Trump's criteria publicly: no nuclear weapons, reopen Hormuz without tolls, turn over enriched uranium.

The unresolved question is whether the framework actually holds. Iran has said it's "reviewing" the proposal. Trump has said he's willing to wait "a few days" for the right answers. The Pakistan-mediated talks continue. Multiple Polymarket contracts could resolve simultaneously if a formal MOU gets signed this week — including the diplomatic meeting market we covered in last week's Smart Money Report, where the top traders were unanimously on NO at 67% YES.

The number to know: 33. That's how many ships transited Hormuz in 24 hours over the weekend. Pre-war traffic was 50-60 daily. We're more than halfway back to normal in operational terms, even before any deal is signed.

What moves the line: Any signed MOU resolves the peace deal market YES. Any breakdown in the framework, particularly if Iran rejects the enriched uranium handover requirement, sends the contracts the other way and pushes oil back above $115.

The markets: GDP growth rate, core PCE inflation, recession contracts Platform: Kalshi Current odds: Vary across data points; recession at ~34% Volume: High across all macro data markets

Why it matters this week: Four data points hit at 8:30 AM ET Thursday in what is essentially the most consequential macro morning of the quarter. Q1 GDP second release will tell you whether the 2.2% initial print holds up under revision. April Personal Income and PCE Price Index — the Fed's preferred inflation gauge — drops in the same release, giving us the cleanest read yet on whether the Iran oil shock is feeding into core inflation. Durable goods orders show whether business investment held up through the war. Initial claims tell you whether the labor market is starting to crack.

The setup is loaded. April CPI came in hot at 3.8% YoY. The Fed held rates at 3.50-3.75% in Powell's final meeting. Warsh just took over as Chair. If core PCE prints at 0.4% MoM or higher, the "no rate cuts until 2027" narrative hardens further and Warsh inherits a hawkish stance from day one. If it prints at 0.2% or lower, the rate-cut conversation reopens.

The number to know: 0.3%. That's the consensus estimate for core PCE month-over-month. The gap between the actual print and 0.3% will move bond yields, the dollar, and rate-sensitive equities within minutes.

What moves the line: A hot PCE print combined with a soft GDP revision is the textbook stagflation setup and sends recession contracts above 40%. A cool PCE print with a strong GDP revision keeps the soft-landing narrative alive and supports the equity rally.

The market: Government funding markets, watching for new contracts on the reconciliation bill timing Platform: Kalshi Current odds: No direct contract on this fight yet, but related government dysfunction markets are moving Volume: Moderate, watching for spikes when the Senate returns

Why it matters this week: Senate Republicans left Washington Thursday for the Memorial Day recess without voting on a $72 billion reconciliation package to fund ICE and Border Patrol for three years. They missed Trump's June 1 deadline. The fight isn't really about immigration enforcement — it's about a $1.8 billion "anti-weaponization" fund inside the package that would compensate MAGA allies prosecuted by the Justice Department, including Jan 6 rioters, George Santos, and Rod Blagojevich.

This isn't a fringe complaint. Mitch McConnell called it "utterly stupid, morally wrong." Senator Tom Tillis called it "stupid on stilts." Bill Cassidy is publicly opposing it. Even Majority Leader Thune is frustrated — he met with acting AG Todd Blanche in a closed-door session that The Hill described as a "screaming-fest" when Blanche refused to limit who would be eligible for payouts.

A separate flashpoint is Trump's $1 billion ballroom funding. The Senate Parliamentarian ruled it couldn't be in the reconciliation bill, and Trump responded by demanding Thune fire her. The combination of the slush fund, the ballroom, and the parliamentarian dispute has stalled what was supposed to be a routine party-line vote. The Senate returns from recess next week. The actual votes will tell us whether the GOP can hold itself together or whether Trump's spending priorities are about to face a real party-line revolt.

The number to know: $72 billion. The size of the reconciliation package — $23B for CBP and $31B for ICE plus the contested $1.8B fund and ballroom money. Already on top of $140B those agencies got from the One Big Beautiful Bill last year.

What moves the line: A failed vote when the Senate returns would be the first time in Trump's second term that congressional Republicans openly killed one of his priorities. Watch for new Kalshi contracts on whether the package passes by June 30, and any government shutdown contracts repricing higher.

June 2 Super Tuesday — Six states hold primaries next Tuesday: California, Iowa, Montana, New Mexico, New Jersey, and South Dakota. Three races have meaningful prediction market action. California Governor (Polymarket): Xavier Becerra has surged to 63% to advance after a late polling rise; Steyer collapsed from 70% in April to the high 20s as Becerra consolidated Democratic support. Steve Hilton holds the Republican lane at 17%. The fragmented Democratic field is creating a real risk that two Republicans (Hilton and Bianco) take both top-two spots — Democratic insiders are quietly panicking. Iowa GOP Governor (Kalshi): Feenstra at 76-77%, which we covered in detail this week — the 35% convention rule is the mispricing. New Jersey Senate (Polymarket): Cory Booker at 97% YES to win his Democratic primary. He has no credible challengers and this contract is a formality, but the November general election market is worth watching for any Republican upset signals.

OKC Thunder NBA Finals — Polymarket — The series is tied 2-2 after the Spurs walloped OKC 103-82 in San Antonio on Sunday night. This is a real fight now. Game 5 is Tuesday in OKC (the Thunder are 64% to win at home), Game 6 Thursday in San Antonio, Game 7 Saturday if needed. Wembanyama is averaging 28.8 PPG in the series.

New York Knicks Eastern Conference Champions — The Knicks are up 3-0 on Cleveland in the East Finals and could clinch a Finals berth this week, their first since 1999.

Colorado Avalanche Stanley Cup — Polymarket — 39% YES — Stanley Cup Finals matchup is still TBD. If Colorado faces Carolina, the contract tightens significantly because Carolina is essentially co-favored.