A rare phenomenon is gripping the market; here's why one fund manager sees more pain ahead

Wall Street's worst week in two years is creating anxiety that more losses are ahead for investors.

Russell Investments' Douglas Gordon suggested recently that feeling may be justified. He contended an unusual phenomenon is creating near-term challenges for the stock market.

"You've got late stage in the expansion where you've got tightening monetary policy. But you've got stimulative fiscal policy concurrent with that. That's not only rare, that's almost unheard of," the firm's senior portfolio manager told CNBC's "Trading Nation" this week.

"That kind of one foot on the gas [and] one foot on the brake concurrently is going to make for a unique market," he added.

Gordon attributes rising 10-Year Treasury Note yields, and the potential for a Federal Reserve policy error, as the main catalysts behind what could soon put the markets in textbook correction territory — which is defined as a 10 percent drop or more.

The threat of rising borrowing costs, and the potential for an overreaction by a Fed that may soon hike interest rates, is stirring widespread angst among investors.

"It's [high yields] going to put some pressure on the forward expectation around companies' earnings," he noted.

His comments came as stocks were tanking, and volatility was hitting its highest level since the 2016 presidential election.

Gordon, whose firm has $296 billion in assets under management, is urging investors to stay well-diversified and nimble.

"There is going to be an opportunity to buy the dip," Gordon said.

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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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