Markets want 'normal,' Fed didn't deliver: Strategist

Markets face earnings headwinds: Pro

Markets are heading down a path of normalization, but the Federal Reserve disappointed last week by failing to put interest rates back on track toward historical norms, Voya Investment Management's Karyn Cavanaugh said Thursday.

The senior market strategist noted that the cost of U.S. crude oil and the dollar index are converging with their 30-year averages, while the expectation for market volatility, as measured by the VIX, is near a 25-year average.

But the Federal Open Market Committee still voted to leave its benchmark interest rate near zero, well below normal levels.

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"The Fed did not raise interest rates, and the market was a little bit disappointed in that ... because that's more the path of normal, and markets are looking for that path of normal," Cavanaugh told CNBC's "We have been talking for months and months that there would be liftoff in September, and then the Fed didn't pull the trigger."

Cavanagh said she doesn't expect the Fed to raise interest rates until 2016 because she expects little to change on the international front.

Last week, the Federal Reserve emphasized stress in overseas markets, such as China, after announcing it would not raise interest rates. Concerns about slowing growth in the world's second largest economy has rocked equities and other assets around the world in recent weeks.

Scott Wren, senior global equity strategist at Wells Fargo, said he maintained his view that the Fed would raise rates in December, but added that central bankers might only hike two more times in 2016.

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Fed Chair Janet Yellen will likely offer more clarity on Thursday in a speech on inflation at the University of Massachusetts-Amherst, he said.

"I think what happened over the weekend was the Fed was surprised by the market reaction going into Thursday's close," he told "Squawk Box." "I think people were talking at the Fed on Friday, and they decided to come out over the weekend in force and start to lay the groundwork for that December meeting."

U.S. stocks turned volatile following the Fed decision on Thursday. Wren said the Fed needs to let the market know well in advance what will happen at its December meeting.

Meantime, market watchers will look to corporate earnings for direction, Cavanaugh said, adding that markets have done little this year because corporate earnings haven't done much.

Earnings have been weighed down by negative revenue growth this year. Revenue for companies fell about 3 percent on a year-over-year basis in the first two quarters of the year. Analysts expect revenues to be down 3.3 percent when companies report third-quarter earnings in the coming weeks, according to data from FactSet.

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"Markets are going to depend on what goes on in corporate earnings, and that's the way it should be. That's the bottom line," Cavanaugh said. "If companies can get over this hurdle of the strong dollar, of low oil and move forward, then we'll see the market move forward."