×

If history's any guide, Janet Yellen's warning may turn out to be a bullish sign

Federal Reserve Chair Janet Yellen speaks at the Institute for New Economic Thinking Conference on Finance and Society at the IMF in Washington on May 6, 2015.
Kevin Lamarque | Reuters
Federal Reserve Chair Janet Yellen speaks at the Institute for New Economic Thinking Conference on Finance and Society at the IMF in Washington on May 6, 2015.

Traders were spooked this week, after Federal Reserve Chairwoman Janet Yellen warned about what she deemed to be stock valuations that were too high.

Yet if history is any indication, warnings about asset bubbles and valuation can often serve as a contrary indicator, market watchers say.

Back in December 1996, former Fed Chairman Alan Greenspan warned that investors were undergoing a bout of "irrational exuberance," a phrase that came to characterize the stock mania of the 90's.

However, Greenspan's warnings, while ultimately prescient following the popping of the internet bubble, turned out to be a bit premature. In the year following those remarks, the S&P 500 proceeded to climb 28 percent in the year.

In March 2007, Greenspan's replacement, Fed Chair Ben Bernanke, expressed confidence that the subprime crisis was likely contained. As it turned out, the crisis was much worse than anyone expected—and the S&P 500 proceeded to have its worse crash since the Great Depression.

Read MorePimco hires Bernanke as senior advisor

More recently, in July 2014, Yellen warned that some areas of the current market, mainly biotech and social stocks, had run a little too far. And after initially selling off, the Nasdaq Biotech ETF – the IBB - has since rallied nearly 30 percent.

With so much history of getting near-term market calls wrong, it's little wonder some investors are tuning Yellen's comments out. "I don't pay so much attention to it," said Fast Money trader, Karen Finerman.