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JPMorgan quant who called volatility spike says expect more of the same in September

Key Points
  • CBOE Volatility Index rose 44 percent on Thursday and Dow tumbled 200 points.
  • The inflection point comes after historically low volatility in the markets.
He predicted the volatility spike, now the man who moves markets says this

If Thursday's 200-point drop in the Dow Jones industrial average wasn't a sign, a 44 percent spike in the widely watched volatility index is a harbinger of more to come, according to Marko Kolanovic, JPMorgan's high profile quant strategist.

Last month, Kolanovic's warning to clients to hedge against a stock market drop sent ripples through the trading desks on Wall Street. Then, the CBOE Volatility Index, or VIX, was trading near record lows, usually a sign things are about to turn, he said.

On CNBC's "Fast Money" on Thursday, Kolanovic said people should expect volatility to rise in September. The historic level is 19, and people should expect VIX to be in the high-teens, low-20s, he said. Right now it is at 16.04.

Congress returns next month and will have to take up the matter of the debt ceiling, the legislative cap on government debt, and a spending bill to avert a government shutdown. Tax reform, the promise of which had lifted markets, seems further off, he said.