The biggest risk to the stock market is interest rates moving higher more quickly than expected, J.P. Morgan Funds Chief Global Strategist David Kelly told CNBC on Friday.
"We're still cautiously overweight U.S. equities," Kelly said in a "Squawk Box" interview. But he thinks rates are "seriously mispriced" in the bond market, and correcting that imbalance could be a drag on stocks.
On Wednesday, the Federal Reserve hinted at a slightly faster pace of interest-rate increases starting next year, but suggested borrowing costs in the long run would be lower than previously expected.
The Fed cut its forecast for U.S. economic growth this year to a range of 2.1 percent to 2.3 percent from an earlier projection of around 2.9 percent. Forecasts for 2015 and 2016 were unchanged. Policymakers also reduced their bond-buying program by another $10 billion to $35 billion a month pace.
"The bond market is unbelievably more dovish than the Federal Reserve itself," Kelly said. "I think the Fed's forecast for the economy are wrong. And their policy is too dovish based on those policies."
At her Wednesday news conference, Fed Chair Janet Yellen also played down recent concerns about inflation.