Pete Hegseth's Pentagon Future: Why the Market Spiked to 72.5% and Fell Back to 45% in a Day, and Why I Think He Stays

The most honest chart in American politics is not a poll, but the price of one Polymarket question: "Pete Hegseth out as Secretary of Defense by December 31?" When I checked on the morning of 5 November, Hong Kong time, Yes traded at 45 percent, with about $301,000 changing hands in the previous 24 hours and $1.31 million in total volume. Behind it lies a round trip: over the previous day the price rose from about 40 percent to a peak of 72.5 percent, then collapsed most of the way back.

The trigger was a CBS News report on 4 November, citing multiple sources, that President Donald Trump has been asking advisers, in person and by telephone, whether Hegseth should stay after the Republican Party's heavy midterm losses on 3 November. According to CBS, some aides expect part of the blame to fall on Hegseth, on Admiral Brad Cooper, head of US Central Command, and on General Dan Caine, chairman of the Joint Chiefs, for advising the president on the Iran war. Vice President JD Vance put it bluntly on Wednesday morning: "The reason we lost is the war." One CBS source even floated a successor: Florida Governor Ron DeSantis, confirmed by the Senate during the lame-duck period, taking over when his term as governor expires on 5 January.

That is a serious report, and the market treated it as one. But pushback arrived fast, from the one person whose opinion decides the question. White House spokeswoman Anna Kelly said Trump "has full confidence in Secretary Hegseth." Asked by reporters on Wednesday afternoon whether he was considering replacing him, Trump said: "No, I think he's doing a very good job." Asked whether Hegseth might instead fill the Tennessee Senate seat expected to open when Senator Marsha Blackburn becomes governor, Trump said he would be "very popular if he did that," but added: "I haven't heard that at all." People close to Hegseth told The Washington Post that he intends to remain for the rest of Trump's term. Asking advisers a question is not a decision; answering it on camera, twice in one day, is closer to one.

Hegseth was the most exposed cabinet secretary in Washington, which is why the report moved the price so violently. The Iran war began on 28 February 2026 without a declaration of war or specific congressional authorisation, and it is the first charge in the eight articles of impeachment introduced against him on 15 September by Republican Representative Thomas Massie, who accused him of violating the War Powers Resolution of 1973. That privileged resolution was shelved when Speaker Mike Johnson sent the House home early, and its forced vote has waited ever since. Democrats, who swept both chambers on 3 November, had already been planning Pentagon investigations. From January, a Democratic House will hold the subpoena power. That is a genuine threat, but it is a January threat, and this market expires on 31 December.

One more exit route also points the wrong way for a Yes bet before year-end. Hegseth moved his family to Tennessee in 2022, and Blackburn, who won the governorship on Tuesday, has said she will stay in the Senate until sworn in as governor in January so she can personally choose her replacement. That appointment would be a graceful Pentagon exit, but it would come in January, after this market's deadline, and nobody has publicly signalled it is arranged. One catch in the market's rules cuts the other way: an announcement of a resignation or removal before the deadline resolves it to Yes immediately, regardless of when it takes effect. A December announcement of a January departure would beat my prediction — a real risk, but one requiring an announcement nobody has yet made.

My prediction, then: Pete Hegseth will still be serving as United States Secretary of Defense on 31 December 2026. I put that at 65 percent. The market's implied probability for him staying is 55 percent, so I am ten points more confident than the traders — a difference of judgment, not a claim to secret knowledge. The gap reflects two things the market underweighted in its spike: Trump's on-camera backing, and the calendar. Removing a defence secretary requires a presidential decision, and the president supposedly about to make it spent Wednesday afternoon telling reporters the opposite. The mechanisms that could end Hegseth's tenure — a House investigation, a confirmation fight, a Tennessee appointment — all run on January clocks, not December ones. If I am wrong, the likeliest path is one this week already demonstrated: Trump asks again, in a week when he does not answer it himself, and a resignation announcement lands before Christmas. A spike, though, is not a sacking, and yesterday's round trip is the best evidence traders know it.