The Atlanta Fed GDPNow model forecasts a 2.5% growth rate for the third quarter of 2025. This estimate has stayed the same from August 5 to August 7 and follows a recent wholesale trade report from the US Census Bureau. After the report, the contribution of inventory investment to third-quarter real GDP growth rose slightly from 0.76 percentage points to 0.82 percentage points. The next update for GDPNow will be on Friday, August 15.

The Economic Environment

The steady 2.5% growth estimate indicates a stable economy. It’s neither booming nor struggling, which often leads to less market volatility. We expect that the implied volatility on major indices like the S&P 500 will likely decrease in the upcoming weeks. Recent data backs up this idea of a “soft landing.” The July 2025 inflation report showed the Consumer Price Index cooling to a 2.8% annual rate, down from earlier higher rates this year. Additionally, the July jobs report revealed a healthy 190,000 new jobs added, suggesting the Federal Reserve has no need for aggressive actions. Given these insights, traders may want to use strategies that take advantage of declining volatility and time decay. Selling premium through methods like iron condors or credit spreads on broad market ETFs could be beneficial. The VIX, which measures expected volatility, has been around 15, a noticeable decrease from the levels above 20 seen during the market uncertainty in spring 2025. The slight increase in the inventory portion of the GDP forecast is also significant. It indicates that businesses in the industrial and manufacturing sectors are beginning to restock. This could open up targeted bullish opportunities in options on sector ETFs like the XLI.

Market Projections And Strategies

This stability in economic forecasts calms the bond market as well. Futures markets are pricing in less than a 10% chance of another rate change by the Fed for the rest of 2025. This lowers the risk of sharp moves in Treasury yields, making it an excellent time to sell volatility on interest rate-sensitive instruments like the TLT. The current market environment reminds us of the low-volatility period experienced in much of 2017. During that time, steady, methodical strategies worked better than risky bets. Focusing on high-quality companies and profiting from the passage of time may be the wisest approach. Create your live VT Markets account and start trading now.

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