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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.

Sara Eisen

Sara Eisen joined CNBC in December 2013 as a correspondent, focusing on the global consumer. She is co-anchor of the 10AM ET hour of CNBC's "Squawk on the Street" (M-F, 9AM-11AM ET), broadcast from Post 9 at the New York Stock Exchange.

In March 2018, Eisen was named co-anchor of CNBC's "Power Lunch" (M-F, 1PM-3PM ET), which broadcasts from CNBC Global Headquarters in Englewood Cliffs, N.J.

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