There's a disconnect between modest economic growth and the roaring stock market, Blackstone Group Chairman and CEO Stephen Schwarzman told CNBC on Thursday.
"The economy is improving pretty modestly. I think there's a lot of bullishness that feeds on itself," he said in a "Squawk Box" interview. "The real world is moving ahead. But it's not barreling ahead."
Schwarzman added, "When you have an economy that grows at 2.5 percent, 2.75 percent, and a stock market that goes up 27 percent, seems somewhat disconnected."
He won't predict whether a correction in stocks is coming but did say that "it seems a low probability that markets continue going up at 27 percent."
For now, investors are reveling in the clarity from the Federal Reserve, which finally ended the "will they, won't they" guessing game. After its final meeting of the year, the central bank announced it will taper its $85-billion-a-month bond-buying program by $10 billion starting in January.
Schwarzman views Fed tapering as a good development. "I think the Fed was basically trying to fight the dysfunction of Washington by just keeping the economy on an even keel. They've had enough of it."
Stocks rallied sharply on the news Wednesday. The Fed is expected to gradually wind down the program over the next year, but it's still holding $4 trillion of securities on its balance sheet.
Another reason to slowly bring QE to a close, he contended, is that "the inflation that everybody said was going to be there hasn't happened at least yet."
He thinks the history books will look at QE3 as modestly helpful. "Each of the QEs have had less impact. The first one had the most."
An area the founder of private equity powerhouse Blackstone likes is housing. "We're the largest owner of homes in the United States. We've seen housing go up in the cities we're in somewhere between 20 percent to 22 percent. That will slow down, but continue to go up."