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Historic bull market only in 'middle innings': JPM

There are many reasons the stock market could advance double-digits again in 2014 and in years to come, JPMorgan chief U.S. Equity strategist Tom Lee told CNBC on Wednesday, a day after the Dow Jones Industrial Average and the S&P 500 Index each gained more than 1 percent.

"This could be only the middle innings of what could be one of the longest bull markets in history," Lee said in a "Squawk Box" interview. "There is a lot of firepower to fuel this rally. There is a lot of cash on the sidelines, consumers have delevered."

The tone of the market really changed late last week, after a three-week buyers' strike, said Lee. "All of a sudden … we got the 'long onlys' coming back and the hedge funds."

(Read more: Bulls ready to reach new highs; caution on rally)

Lee has been bullish for four years, during which the Dow and the S&P 500 more than doubled.

A day before the worst February start since 1982 for the Dow and since 1933 for the S&P, he was optimistic—telling CNBC that he did not expect the downturn to reach the 10 percent correction level. At the time, he predicted, "we're within a couple percent of the bottom."

It turned out that the Dow and the S&P bottomed out for the year on Feb. 3, the first trading day of February. Since then, those indexes are each up over 4 percent as of Tuesday. But the Dow is still down 3.5 percent for 2014, while the S&P is off about 1.5 percent.

In many ways, this year's pattern is similar to what happened in early 2013 when stocks returned 30 percent, Lee said. "When we look back at last year, about half the market had a tough time until March and May."

The market did not go straight up in 2013, he added. "It was really a year that started off as utilities and defensives-led, and then all of sudden we switched to March to a traditional to a bull market-type rally."

Lee said he's still "very optimistic this is a double-digit year for the S&P." His year-end target for the index is 2,075, which would be a 14 percent increase from Tuesday's close.

Comments on Capitol Hill from new Federal Reserve Chair Janet Yellen fueled that rally, as she reassured Wall Street that the Fed would continue its policy of providing monetary stimulus to bolster the economy.

"Yesterday was a reminder that even if we're transitioning to a new central bank chief, we've got a lot of continuity," Lee said.

(Read more: Yellen's new program: Same as the old one)

By CNBC's Matthew J. Belvedere. Follow him on Twitter @Matt_SquawkCNBC.

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