As we teeter in the Bradley Sideorgraph market turn period, Yellen's yell to sell has been joined by an upswing in Russia/ Ukraine hostilities, together with further US sanctions against Russian companies, Portuguese banks and the usual concerns of overvaluation that Yellen has only added voice to.
To that extent Yellen's concerns are generic and are not under the control of the Fed. Raising interest rates doesn't stop people buying lottery tickets.
One comparison that is being made is that between Yellen's latest comment and Greenspan's "irrational exuberance" speech of Dec '96.
The first thing to note is it took another three years of irrational stock exuberance before it all came tumbling down in March 2000. But it was different then wasn't it? Greenspan cut interest rates in the intervening period rather than raising them. As my old friend Macro Man points out, we now have a young generation of traders who have never experienced rising interest rates and what it does to market's so they will be in for a shock.
But that new generation has also be conditioned by tail risk. Like young lads sent to the front, they are all shell shocked and nervous as hell having been led into battle and taught by, tail risk glory hunters who made their killing in the Global Financial Crapout and subsequent Euro campaigns. They are programmed to look for tail risk. The condition they are not programmed for is irrational exuberance.
Though BAML have issued their Fund manager survey ( see a great run through here on GlobalMacroTrading) I guess what we need is data on how leveraged markets are in long equity positions vs 1999 (any help appreciated). It's leverage that kills and I don't believe anyone is mortgaging their house to buy stocks just yet, more likely the reverse - they are selling their stocks to buy a house.