What's behind crazy markets? Fed's "mixed message"

The Federal Reserve finds itself between the proverbial rock and a hard place as it has embarked on a path of raising interest rates in the face of a slowing U.S. and global economy.

After much postponing in the face of low inflation and concerns about the global economy, the U.S. central bank in December officially pulled the plug on an unprecedented period of easy monetary policy, raising the federal funds rate from at or near zero to 0.25 percent and signaling four additional moves in 2016.

"The Fed is in a tricky position today," Rick Rieder, BlackRock's global chief investment officer of fixed income told CBS News at the World Economic Forum at Davos. "They are starting to move in a period of time where we've seen growth in the world slow."

The BlackRock portfolio manager is among a growing number of investors and analysts who have dialed back expectations that the Federal Reserve would raise interest rates four times this year.

"The Fed has described how they are going to move four times this year. I don't think they are going to move four times this year," said Rieder, who believes there will be at most two hikes by the Fed in 2016. "Growth in the world is difficult, volatility is higher in the world," said Rieder of the hand the Fed has been dealt.

Art Hogan, chief strategist at Wunderlich Securities, concurred, saying that the stock market's wild and mostly downward ride in recent weeks is in part due to the "mixed messages" from the Fed. "We need a little more clarity as to why they are sticking to a four narrative when the data doesn't support that."

The Fed is tightening monetary policy as U.S. economic growth loses steam, with the gains made in the U.S. labor market unlikely to be sustained at the same robust pace in the months ahead, Rieder said.

"The Fed has had a window to move rates for a couple of years -- they are going to have to be slower now," Rieder said. "You've had this tremendous growth in terms of payrolls, I think you've seen some of the best days in terms of that growth."

Thoughts that the global economy would grow more slowly than expected in 2016 have roiled global markets, pushing the S&P 500 (SPX) to a 21-month low earlier in the week. But U.S. stocks on Friday were poised for their first weekly gain of the year, extending a rally into a second day on thinking central banks overseas -- including the European Central Bank (ECB) -- would further their stimulus, even as the Fed moves in the opposite direction.

The scenario makes the Fed's tight-rope walk that much more dicey, Rieder said.

"You have aggressive monetary policy, like what the ECB is doing, that could drive the dollar higher and slow the U.S. economy -- it's part of why I think they could have gone a number of months ago in terms of beginning this policy."