In his presentation, Kelly also outlined the risks to the economy posed by Washington gridlock. He also urged the Federal Reserve to end its bond-buying program and projected it would do just that sooner rather than later.

"It's a very complex world," Kelly began. "Over the last few years, all you needed to succeed is a little bit of logic and a little courage. Now you're going to need a more sophisticated approach."

Kelly said JPMorgan wasn't trying to forecast matters so much as understand what's happening in the world at the moment. "The secret to success is to see the present with clarity," he said.

Regarding the U.S. economy, the biggest obstacle remains the wrangling in Washington, he said. "I'd feel good if we can get past that," he said.

"We are actually in the fifth year of economic expansion right now. Most Americans don't realize that," he said, noting that the nation's budget deficit last year fell by more than at any time in more than 40 years.

What's needed for a more efficient economy, he said, is tax, social program and immigration reform. "We're like a Porsche at a red light. We are weighted down by stupidity in our tax code and entitlement system," he said. "I hate that."

If it weren't for the threats from Washington, he said, "prospects are pretty good for growth."

Unfortunately, the people we elect to Congress "don't have the first clue how the economy works," he said. "'Wait and see' are the three most toxic words in economics."

Looking ahead, he said he doubted Republicans would shut down the government again next year. "Not in an election year," he said. "Besides, Obamacare is the gift that keeps on giving," so the GOP would be wise to allow the public's confusion about health care reform help its candidates win seats in the 2014 mid-terms.

Despite all of the issues in Washington, Kelly projected growth in 2014 of 2 or 3 percent, and probably closer to 3 percent. "Not bad," he said.

That's  why, he said, "this (equities) market is not yet over-valued. It's not cheap any longer. But I think equities will out-perform."

The big disrupter on things down the road? The Fed's bond-buying, he said. Kelly said the Fed should start its tapering as soon as possible. Inflation could be rising in the next couple of years and that would make all of the liabilities on the Fed's balance sheets far more expensive than they are at the moment, he said.

"Today's inflation rate isn't the problem. It's tomorrow's," he said. "It's like being the captain of the Titanic. You can see the iceberg ahead but can't turn very fast. The Fed needs to move today, or it's going to be very disruptive to the bond market."