The New York Fed Staff Nowcast for the third quarter of 2025 stands at 2.10%, a slight increase from the previous week’s figure of 2.08%. This adjustment was influenced by opposing movements in the Philly and Empire Fed surveys, which balanced each other out, while retail sales provided a small upward boost.
Further data will be released leading up to the advance reading on the third quarter, scheduled for October 30. Until this point, substantial additional information will contribute to forming a more comprehensive forecast.
Economic Resilience Signals
With the New York Fed’s GDP nowcast firming up around 2.1%, we see this as a sign of continued economic resilience. This reduces the immediate odds of a Federal Reserve interest rate cut, which had been a growing possibility earlier in the summer of 2025. This steady growth narrative suggests a “higher for longer” rate environment is the most likely path forward.
Given this outlook, we believe traders should be cautious about betting on significant interest rate cuts in the near term. The CME FedWatch Tool shows the market is only pricing in a 25% chance of a cut by December, and this GDP data reinforces that low probability. Therefore, positioning through SOFR futures to reflect a stable federal funds rate for the remainder of the year seems prudent.
This stable growth also implies that market volatility may remain subdued. With the VIX currently hovering near 14, a historically low level, selling options premium on broad indexes like the S&P 500 could be an attractive strategy. We are looking at strategies like iron condors to take advantage of a market that is expected to grind higher without major shocks.
Consumer Sector Strength
The slight lift from retail sales data points toward strength in the consumer sector. We have seen the Consumer Discretionary Select Sector SPDR Fund (XLY) gain over 4% in the last quarter, outperforming the industrial sector. Using call options or call spreads on consumer-focused ETFs could offer a targeted way to play this specific strength.
Ultimately, the data suggests the “soft landing” scenario is still very much in play. We are positioning for a market that is not overheating but is also not falling into a recession. The main risk remains an upside surprise in the next inflation report, which could force the Fed’s hand and disrupt this calm.
