The Atlanta Fed’s GDPNow forecast for Q3 has been updated to 3.1%, up from the previous 3.0%. This change reflects the seasonally adjusted annual rate of real GDP growth for the third quarter of 2025. Recent information from the US Bureau of Labor Statistics and the US Census Bureau contributed to this update.

Increase In Nowcasts

Nowcasts for real personal consumption expenditures growth have risen from 2.1% to 2.3%. Similarly, growth in real gross private domestic investment increased from 6.0% to 6.2%. However, the contribution from net exports to GDP growth slightly decreased, from 0.28 to 0.23 percentage points. The initial estimates for this quarter started at 2.1% and peaked at nearly 3.5%. The next update for the GDPNow forecast is scheduled for September 16.

Recent Upward Revision

The upward revision of the third-quarter growth estimate to 3.1% indicates a strong economy, supported by high consumer spending and business investment. This resilience makes it less likely that the Federal Reserve will cut interest rates soon. Traders may need to adjust their strategies that were based on a slower economy forcing the Fed to act. In the bond market, yields are reacting to this positive data. For example, the 10-year Treasury yield has increased to around 4.6%, suggesting that borrowing costs will stay high. According to Fed funds futures, the market now sees only a 30% chance of a rate cut by December 2025, a sharp decrease from the 50% probability observed just weeks ago. In equity derivatives, this creates a mixed situation. Strong growth is balanced by high interest rates. The implied volatility index (VIX) remains steady at around 17, indicating uncertainty but not panic. In this climate, strategies such as selling covered calls on existing stock positions or setting up iron condors (which profit when stocks stay within a specific range) may be favorable. This scenario feels similar to the economic climate in 2023, where growth consistently exceeded expectations, even amid one of the most aggressive rounds of interest rate hikes ever. Back then, many faced losses betting on a hard landing. This historical comparison suggests that buying deep out-of-the-money puts on broad market indices like the S&P 500 may not be a wise investment in the coming weeks. With a strong economy and a cautious Fed, the US dollar is likely to stay strong. The Dollar Index (DXY) is testing recent highs near 106.50, a level not seen since spring. Options traders might consider bullish positions on the dollar against currencies with central banks adopting a more dovish approach. Create your live VT Markets account and start trading now.

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