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Why the market could get rocky no matter what the Fed says

The market has traded in historically tight ranges over the last few months, and with the CBOE Volatility Index at 15, volatility isn't expected to pick up meaningfully over the next few weeks. But one strategist says the calm will not last.

"I think we're in for some rocky times," Boris Schlossberg, managing director of FX strategy at BK Asset Management, said Tuesday on CNBC's "Trading Nation."

"Irrespective of whether the Fed hikes [Wednesday] or not, or whether it waits until December, they're definitely on a path toward monetary tightening. At the same time, the tightening in the election cycle is also starting to occur as we're going into the election," Schlossberg said.

These forces together, he said, will lead to a more turbulent market than investors are anticipating.

"[Investors] have been way too complacent, and I think we're going to see a pretty big spike in volatility as we go into the year-end," Schlossberg added.

Earlier this month, JPMorgan's global head of derivative and quantitative strategy, Marko Kolanovic, published a note forecasting an increase in market volatility, likewise citing the Fed and the election.

Kolanovic noted the Democratic and Republican candidates' proposed economic programs are very different, increasing uncertainty about the upcoming months.

"In addition to the risk of a volatility driven deleveraging, a more troubling development would be if data from central banks (ECB, BOJ and Fed) signal monetary policy tightening," Kolanovic wrote, adding this could result in a "significant sell-off across asset classes."

Still, Kolanovic predicted the Fed will not hike interest rates this month, and thus such a scenario would likely not happen.

The U.S. central bank is scheduled to release its statement on interest rate policy Wednesday at 2 p.m. EDT.


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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Brian Sullivan

Brian Sullivan is co-anchor of CNBC's "Power Lunch" (M-F,1PM-3PM ET), one of the network's longest running programs, as well as the host of the daily investing program "Trading Nation." He is also a frequent guest on MSNBC's "Morning Joe" and other NBC properties.

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