With the S&P 500 and the Dow Jones Industrial Average within 1 percent of their record highs, some major sectors of the market have "bubblelicious valuations," according to hedge fund manager Third Point, led by the renowned Daniel Loeb.

The commentary came in a letter to investors obtained by CNBC.

As for overall valuations, Robert Shiller's cyclically adjusted price-earnings ratio, which uses 10-year average earnings, stands at 25.4, up from an average of 16.5 since 1881.

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The Third Point letter said some financial market participants jumped the gun in their enthusiasm for the economy earlier this year. But the stock market's recent correction was "healthy," Third Point said. And now the economy is starting to strengthen.

"It now seems evident that investment performance will require a combination of good stock selection, patience and deft trading," the firm noted.

Meanwhile, the Fed's tapering of quantitative easing might not end peacefully for the markets, Third Point stated.

"As tapering ends, most likely in October, and the discussion shifts to an impending first rate hike, . . . we will have to buckle our seatbelts for an inevitably more volatile environment."

Not everyone is worried about stock valuations. David Zervos, chief market strategist at Jefferies, told Yahoo that stocks aren't overvalued and investors should buy on price declines.

"A lot of the valuation metrics that are typical of the stock market, . . . they fail to take into account the extraordinary monetary policy that's been put into place."

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