Fed made a mistake hiking rates in December: Najarian

The question virtually all investors have been asking is whether the US economy is gaining or losing momentum. The answer to that question put us squarely back into our 'bad news is good news' trading paradigm as the Gross Domestic Product (GDP, which measures the value of everything we produce) expanded at a pitiful 0.7 percent annual rate from October to December.

This proves demonstrably that the Federal Reserve did make a mistake with its December bump up in interest rates, as the path of GDP is clearly falling from left to right on the charts.

Read MoreThe Fed is freaking out about financial markets

As you may recall prior to the December Fed hike, the major potential drawbacks were addressed ad nauseum in the press. Two of the biggest potential negatives were as follows:

1) Further unwanted strengthening of the U.S. dollar, and;

2) The fear that the next move(s) by the Fed would overshoot the necessary and plunge the economy into recession.

Jon Najarian, Najarian Family Office
Adam Jeffery | CNBC
Jon Najarian, Najarian Family Office

The first issue has proved to be a non-issue: The dollar has remained stubbornly floating near the $1.09 level against the euro since the December move. The second issue was more problematic as the Fed and its voting members projected four more rate increases in 2016.

Our debt markets didn't believe a word of it, despite all the hawkish rhetoric from the Fed. The traders in Fed Funds had already priced in a single move by Fed Chair Janet Yellen and crew. It was a combination of this incredible divergence of potential outcomes, which further riled commodity markets and were the primary catalysts for the rapid onset of volatility in global markets.

Read MoreThe Fed should stay the course on rates: Feldstein

But post GDP data, those same debt markets now price in zero Fed moves in 2016, and fixed income traders have put their money on rates being lower for longer, due to the anemic growth of the US economy. This view is reflected in Fed Funds as well as the 10-year Treasury, which now stands at 1.93 percent—down nearly 50 basis points from 2.41 percent, where it traded prior to the December hike.

The U.S. has had a dozen bull markets since 1933, and when the Fed made its first rate hike in each, the markets moved higher over the subsequent 39 months. The outlier to that positive run occurred in 1946, when the Fed tightening set off a full-fledged bear market.

So now the question facing our markets is when will the Fed's estimable policymakers recognize how out of touch they are, and lower their guidance and soften their hawkish tone. If that recognition comes sooner rather than later, then markets will be considerably higher—rendering this first month of 2016 as just a bad memory.

On the other hand, the Fed may insist on being obstinate, and for the sake of propriety doesn't want to look as if the markets are bullying it. That means January will serve as a harbinger of things to come.

Commentary by "Fast Money" trader Jon Najarian, a professional investor, money manager, media analyst and co-founder of optionMONSTER and tradeMONSTER. He worked as a floor trader for 25 years and before that, he was a linebacker for the Chicago Bears. Follow him on Twitter @optionmonster.