Forget the taper.

A "panic taper" is the largest threat to markets, Wells Capital Chief Investment Strategist Jim Paulsen told CNBC.

Rising velocity, the speed at which money changes hands, and the menace of inflation could cause the Federal Reserve to taper hurriedly instead of reducing its economic stimulus systematically, Paulsen said.

Markets are focusing on when the Fed will start tapering, reducing its monthly bond purchases, with predictions generally ranging from this month to March. But the timing of the Fed's tapering isn't what markets should be worried about. When the Fed starts tapering isn't as important as how it goes about it.

"If velocity rises, the Fed won't be able to drain quantitative easing reserves fast enough to calm anxieties of potential overheated/inflationary consequences from the past few years' QE program," he told CNBC. "Typically, Fed policy shifts gears only under panic conditions and this is my best guess as to how Fed policy will most likely be reversed in 2014."

Fear of inflation, rather than inflation itself, may be enough to prompt tapering, he said.

"It's not critical that we have a real inflation problem. It's just a matter of whether we have an inflation fear and I can see the ingredients of that. That to me is the bigger event that could occur sometime in 2014."

Falling unemployment, rising commodity prices and a new Fed chairman who is seen as dovish may cause inflation fears to rise.

"If wage inflation were to tick up a little we just could have a panic about it."

The size of the taper is also a major factor, he said.

"I think if they do do it, it's just going to be a baby step. They'll do it just to put [it] in motion before [Janet] Yellen takes the helm and to mark the end of [Ben] Bernanke's helm."

In a speech at the CFA Society, St. Louis Fed President James Bullard said the Fed may consider a small taper at its December meeting because of the improving job market, reported MarketWatch. It could pause tapering at following meetings if inflation does not return to its target.

There is no "widely accepted reason" why inflation is low in spite of the Fed's stimulus, Bullard said, MarketWatch reported.

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