The Atlanta Fed’s GDPNow model keeps its growth estimate for the second quarter of 2025 at 2.4%. This number hasn’t changed since the last update on July 18. The predictions for major GDP components have only seen slight adjustments after the latest data from the US Census Bureau and the National Association of Realtors.

Upcoming GDP Model Update

The GDPNow model will be updated on Tuesday, July 29. The Bureau of Economic Analysis will release the initial GDP estimate for Q2 2025 on Wednesday, July 30, at 8:30 AM Eastern Time. This will offer a clearer picture of economic performance for the quarter. We consider the steady 2.4% growth estimate a sign of economic strength, especially since actual growth for the first quarter of 2024 was only 1.3%. This hints at a possible resurgence that the market might not fully anticipate. Thus, we should prepare for surprises around the official data release on July 30. With the final update and the official release being significant events, we expect an increase in implied volatility. Typically, the CBOE Volatility Index and options premiums on major indices rise in the days before key data releases. We believe that selling volatility through strategies like short strangles or iron condors could be beneficial if the final number comes close to expectations.

Market Reactions to GDP Data

If the GDP number is much higher than 2.4%, it could disrupt the market’s existing expectations for Federal Reserve rate cuts, which the CME FedWatch Tool indicates are still anticipated this year. In such a case, we’d consider buying near-term call options in sectors that react to economic strength. Conversely, a significant drop below expectations would likely boost bets on rate cuts, making put options on indices an appealing choice. The Citigroup Economic Surprise Index for the U.S. has been around zero lately, showing that data is aligning closely with economists’ forecasts. This environment suggests that the market might be taking it easy, so any big shift from the 2.4% estimate could have a strong effect. Therefore, we could explore low-cost, long-volatility positions to take advantage of an unexpected result. Create your live VT Markets account and start trading now.

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