Kalshi’s 28% odds and five failed macro calls expose forecast limits

By Amara Osei

Kalshi gave Democrats a 28% probability of winning both houses of Congress at the beginning of 2026, according to Mark Hulbert. Hulbert, a regular MarketWatch contributor, runs Hulbert Ratings, which tracks investment newsletters that pay a flat fee to be audited.

Hulbert reported that by the week before the election, prediction markets favored Democratic control of Congress. He invoked January’s “smart money” pessimism as a reason not to place too much faith in the markets.

Hulbert argued that no one else has shown a consistently better macro-forecasting record. He then cited an artificial-intelligence test. On Nov. 2, 2026, the day before the election, Hulbert said DayTrading.com gave $10,000 to each of four “flagship AI models” to trade any Kalshi election contract. The four lost 16% on average.

Hulbert also assembled year-ahead Wall Street forecasts sent by several prominent analysts in the first week of January 2026. He said not every prediction he received was as wrong as the five below, and investors could not have known which would fail because each carried equal confidence. His summary was direct: “Analysts are often wrong but never in doubt.”

• Growth. Hulbert’s table listed the forecast: “GDP will grow at an annual rate of 5%.” Actual annualized GDP growth for the first three quarters of 2026 was 2.7%.
• Inflation. Hulbert listed: “Deflation, not inflation, will be the biggest challenge to the U.S. economy.” The Consumer Price Index instead rose at a 4.2% annualized rate in 2026, compared with 2.7% in calendar 2025, and inflation accelerated.
• Rates. Hulbert’s table showed the forecast: “The Fed will cut rates four more times.” The Fed made no cuts in 2026 and raised the fed funds rate once.
• Gold. Hulbert’s table showed: “Gold prices will remain strong.” Gold fell at a 5.5% annualized rate so far in 2026.
• Crude oil. Hulbert’s table showed: “Crude oil will remain near 5-year lows.” Crude oil rose at a 63.4% annualized rate so far in 2026.

Forecast probabilities make it almost certain that macro forecasts will be wrong far more often than right, Hulbert wrote.

Howard Marks, co-founder of Oaktree Capital Management, examined that problem in an essay published several years ago. He imagined a macro manager’s chain of reasoning:

“I predict the economy will do A. If A happens, interest rates should do B. With interest rates of B, the stock market should do C. Under that environment, the best-performing sector should be D, and stock E should rise the most.”

Marks challenged the final stock call in that chain:

“But how likely is E anyway? Remember that E is conditioned on A, B, C and D. Being right two-thirds of the time would be a great accomplishment in the world of forecasting.

But if each of the five predictions has a 67% chance of being right, then there is a 13% probability that all five will be correct and that the stock will perform as expected.”

Marks concluded by quoting the late Peter Bernstein: “Forecasts create the mirage that the future is knowable.”

Marks cited the market-lagging performance of macro hedge funds as evidence of the difficulty. Hulbert described these funds as based on macro forecasting; they charge high fees and attract some of Wall Street’s best and brightest talent. Hulbert’s updated chart showed that macro hedge funds on average lagged other hedge-fund types, which in turn lagged the S&P 500.

Hulbert extended the warning to 2027. He said prediction markets, AI, the best analysts and macro hedge-fund managers cannot overcome the future’s fundamental uncertainty. He also argued that the stock market’s impressive long-term performance compensates investors for incurring that uncertainty, which is not going away.

The late economist John Kenneth Galbraith framed the problem: “There are two kinds of forecasters: Those who don’t know, and those who don’t know they don’t know.”

Hulbert’s guidance for the 2027 forecasts filling inboxes over the next couple of months is to take each one with a healthy grain of salt.