Beware this hurt and confused market: Strategist

After a brutal start to the year, professional investors find themselves in a miasma of confusion and loss — which could lead to even more dramatic moves in the sessions ahead. So contends Neil Azous, an investment strategist at Rareview Macro.

"The professional community is either very confused or impaired at the moment, and possibly both," Azous wrote in a Wednesday morning missive.

Investors are currently suffering "duress" on their profit-and-loss statements, Azous explained, with mutual funds seeing declines of 7 percent, and retail investors "down somewhere between 5 and 15 percent."

What's more, the pain is coming through multiple channels, many of which are difficult to fully understand. The Federal Reserve is in tightening mode even as some think it should be cutting rates; crude oil's decline is being alternately blamed on oversupply and mere market positioning; China is devaluing its yuan amid slowing growth; and more central banks are pursuing negative interest rate policies.

In this market fog, any sudden movement could provide highly unsettling. That's why Azous warns that the market reaction to a soft jobs report could be dramatic.

"The combination of P&L duress and confusion makes any outlier [employment] number ... a lot higher in terms of sensitivity, in terms of where the market might take things," Azous said in a Wednesday "Trading Nation" interview.

Current consensus expectations are for about 200,000 net new jobs to be recorded in January by the nonfarm payrolls metric. But Azous says the "whisper number," which reflects more recent expectations, is closer to 170,000.


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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.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

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