The Fed's accompanying Monetary Policy Report provided more details: "Equity valuations of smaller firms as well as social media and biotechnology firms appear to be stretched, with ratios of prices to forward earnings remaining high relative to historical norms."
Beyond valuations, there is also the issue of how investor behaviour in terms of risk taking has been altered by an extended period of low interest rates that a central bank is in no rush to change.
Booming asset prices have been accompanied by a collapse in market volatility. This has encouraged many, notably Pimco, to sell option premiums as a way of augmenting returns. This is a profitable endeavour – so long as calm waters prevail.
Mr Kastner says Fed policy has driven investors into areas of the market and exuberance that typified the end of the last boom in 2007. But he worries that changes since then have exposed retail investors to greater excesses with credit derivative securities being packaged into exchange traded funds and how small investors are now able to invest in illiquid hedge fund strategies. He also contends that junk bonds and the bank debt market "is approaching bubble territory".
Read MoreFed slaps stocks with unusually targeted comments on valuation froth
The greatest reason to worry about all these developments is that when investors seek an exit, any crowding of the gate will send markets into a tailspin, as we saw in 2008 and also for tech stocks in 2000.
Having told investors that the Fed wants a stronger economy and higher inflation before policy tightens, Ms Yellen faces the prospect that asset prices will rise further and ignore her powers of persuasion to deter the reach for yield.
Only a genuine inflation scare can alter investors' mindsets, but by then any major market reversal could well damage the economy and central bank credibility.
—By Michael Mackenzie, Financial Times