The Atlanta Fed’s GDPNow model estimates a 2.2% growth for Q3 2025. This is a slight dip from the previous estimate of 2.3% on August 19. Recent data from the US Census Bureau and the National Association of Realtors has led to a decrease in the forecast for third-quarter real gross private domestic investment, lowering it from 4.9% to 4.4%.

Upcoming GDPNow Update

The next GDPNow update is set for August 29. We’re noticing the first signs of a slowdown since the Q3 growth estimate has dropped to 2.2%. This change reflects a weaker outlook for business investment and housing. While not a large drop, it’s a shift in direction we should watch in the upcoming weeks. This slight cooling matches recent data showing that initial jobless claims rose to 235,000 last week, indicating a softer labor market. As a result, expectations for Federal Reserve policy are changing. Interest rate futures now suggest a higher chance of a pause in rate hikes for the rest of the year. Traders are closely monitoring the upcoming Jackson Hole symposium for any updates from the central bank. With economic forecasts becoming more uncertain, we should expect an increase in market volatility from its recent lows. The CBOE Volatility Index (VIX), which traded near 14 last month in July 2025, may gradually rise toward the 18-20 range. This setting makes options protection on major indices more appealing than it was a month ago.

Investment Strategies And Market Reactions

The drop in the investment forecast hints at weakness in cyclical sectors like housing and industrials. Looking back at the rate-sensitive decline of 2023, we saw how quickly these sectors could falter under pressure. Therefore, we might consider purchasing puts on real estate ETFs or major homebuilder stocks as a hedge against further investment declines. On the other hand, a slowing growth environment may benefit defensive sectors less affected by the economic cycle. We could explore call options on consumer staples and healthcare, which have historically remained strong during periods of lower growth. This is a classic rotation strategy we’ve seen in past economic uncertainties. For a more structured approach, a bearish put spread on a broad market index like the SPX could be effective. This strategy lets us profit from a slight downturn or a sideways market while keeping our maximum risk defined. It’s a cautious response to potential cooling, not a bet on a market collapse. Create your live VT Markets account and start trading now.

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