Assessing the Implications of the St. Louis Fed’s Revised Q3 GDP Nowcast for Equities and Commodities

The St. Louis Fed’s latest Q3 2025 GDP Nowcast of 3.0% real growth, unchanged as of September 4, 2025, signals a resilient macroeconomic backdrop despite divergent signals from other models like the New York Fed’s more cautious 2.2% estimate [1]. This nowcast, derived from the GDPNow model, synthesizes hard data such as industrial production, trade balances, and consumption trends, offering a real-time barometer of economic momentum. For investors, the implications for equities and commodities hinge on the interplay of these drivers and sector-specific vulnerabilities.

Macroeconomic Momentum: A Tale of Two Models

The St. Louis Fed’s 3.0% nowcast contrasts with the Atlanta Fed’s GDPNow model (also 3.0%) and the New York Fed’s 2.2% projection, underscoring methodological differences. The St. Louis model relies heavily on soft data—consumer and business surveys—while the Atlanta Fed prioritizes hard metrics like retail sales and industrial output [2]. This divergence reflects broader uncertainties: for instance, the St. Louis Fed’s Economic News Index had previously projected a modest 0.54% growth in August 2025, suggesting volatility in real-time data [3].

Key drivers of the 3.0% nowcast include robust consumption (accounting for ~70% of U.S. GDP), moderate industrial production, and trade policy normalization. However, risks persist, particularly in sectors exposed to U.S. tariff policies, which have disrupted supply chains and dampened demand for industrial commodities [4].

Sector-Specific Impacts on Equities

1. Consumer Discretionary and Durables: Strong consumption metrics bode well for equities in retail, automotive, and housing. However, tariffs on Chinese imports have raised input costs for manufacturers, squeezing profit margins in sectors like semiconductors and machinery [5].
2. Defensive Sectors: Utilities and insurance stocks are gaining traction as investors hedge against policy uncertainty. These sectors offer stable cash flows and pricing power, insulated from trade-related volatility [6].
3. Technology: While innovation offsets some cost pressures, rising tariffs on rare earths and semiconductors pose long-term risks. Investors are advised to favor firms with diversified supply chains [7].

Commodities: Diverging Fortunes

• Precious Metals: Gold has surged to record highs amid inflationary pressures and geopolitical tensions, with the St. Louis Fed’s nowcast reinforcing its role as a safe-haven asset [8].
• Industrial Metals: Copper and aluminum face headwinds from U.S. trade policy uncertainty, though demand from manufacturing reshoring could provide a floor [9].
• Energy: Geopolitical tensions in the Middle East have briefly rattled oil markets, but the St. Louis Fed’s growth projection supports steady demand for energy, particularly in AI-driven data centers [10].

Strategic Positioning for Q3 2025

Investors should prioritize sectors aligned with the nowcast’s emphasis on consumption and industrial resilience while hedging against trade policy risks. Defensive equities and gold remain attractive, whereas industrial commodities require caution until trade policy clarity emerges.

Source:
[1] GDPNow,
https://www.atlantafed.org/cqer/research/gdpnow
[2] Diverging forecasts,
https://fredblog.stlouisfed.org/2017/04/diverging-forecasts/
[3] St. Louis Fed US Q3 GDP Nowcast Estimate 0.54 Gain Vs Previous 0.367% Gain,
https://www.marketscreener.com/news/st-louis-fed-us-q3-gdp-nowcast-estimate-0-54-gain-vs-previous-0-367-gain-ce7c50dddd8af224
[4] Sector-Specific Impact: Trump Tariffs On US Industries 2025,
https://farmonaut.com/usa/sector-specific-impact-trump-tariffs-on-us-industries-2025
[5] Corporate credit outlook amid policy uncertainty,
https://www.zaisgroup.com/corporate-credit-outlook-amid-policy-uncertainty.html
[6] Sector opportunities for Q3 2025,
https://www.ssga.com/us/en/intermediary/insights/sector-opportunities-for-q3-2025
[7] Sector-Specific Impact: Trump Tariffs On US Industries 2025,
https://farmonaut.com/usa/sector-specific-impact-trump-tariffs-on-us-industries-2025
[8] Commodities Outlook - Q3 2025,
https://www.stonex.com/en/thought-leadership/commodities-outlook-q3-2025/
[9] Commodities Outlook - Q3 2025,
https://www.stonex.com/en/thought-leadership/commodities-outlook-q3-2025/
[10] Global Economic Overview – March 2025,
https://www.investec.com/en_gb/focus/economy/global-economic-overview-march-2025.html