Jim Paulsen, chief investment strategist at Wells Capital Management, wasn't too impressed with Federal Reserve Chair Janet Yellen's expression of concern about possible bubbles in the stock market during congressional testimony this week.

"Equity valuations of smaller firms as well as social media and biotechnology firms appear to be stretched," Yellen told lawmakers.

The remarks reminded Paulsen of then-Fed Chairman Alan Greenspan' warning of possible
"irrational exuberance" in the stock market in December 2006. "The market doubled over the next four years," Paulsen told Yahoo.

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Yellen's comments are unlikely to have lasting impact, he said. "Wall Street’s going to be more dictated, just like the Fed at the end of the day, by what happens on Main Street."

Meanwhile, "if there is a bubble generated you’d have to say the Federal Reserve with their
massive zero interest rate, $3.5 trillion excess reserve policy is part and parcel the foundation for any bubble creation," Paulsen said. "Rather than warning us, they should normalize policy."

Stanford University economist John Taylor thinks the central bank should do more than normalize policy. He argues it should adopt rules-based policy.

"When monetary policy became more rules-based during the 1980s, 1990s and until recently, the economy improved and we got what economists call the Great Moderation of strong economic growth with declining unemployment and inflation," he writes in The Wall Street Journal.

"When policy became more ad hoc, interventionist and discretionary during the past decade, the economy deteriorated, and we got a financial crisis, a Great Recession, and a not-so-great recovery."

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