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Gundlach: We don't see a recession on the horizon. But there's bad news...

Bond investor Jeffrey Gundlach, the CEO of $121 billion DoubleLine Capital, says one would have to look very hard for a recession in the near term, but some indicators are starting to turn yellow.

"I think right now it's too early to say that we have the necessary conditions in place for a recession on the foreseeable horizon, which is good news," Gundlach told Yahoo Finance. "But the bad part of that news is the foreseeable horizon is typically no longer than six months, usually, more like four to six months."

[Full transcript of Jeffrey Gundlach’s appearance on The Final Round]

Gundlach, who accurately forecasted the subprime mortgage crisis, pointed out earlier that the narrative going into 2018 was one of synchronized global expansion.

"Everything was really flashing green lights for the economy entering 2018. And yet, what's interesting about that when things were flashing green light, most people don't understand that it means it's kind of the end of the game for risk assets," he said.

He added that the global stock market peaked January 26, 2018, while the U.S. hung on until October of last year.

"Entering 2019, there was a narrative developing that is also true of some synchronized global slowdown. Yet, the indicators that we look at for a recession are not even flashing fully yellow yet," he said, adding, "It's more of a yellowish green right now."

DoubleLine looks at leading economic indicators, with the "granddaddy of them" being the U.S. Conference Board Leading Economic Indicator.

"That year-over-year always has gone negative before the front end of a recession. And while it's weakening from a very high level, it's still pretty high at around 5% year over year. And the stock market being up in the last couple of months means that probably, the leading indicators will hang in there," he said.

The unemployment rate is starting to “flash yellow”

However, one area that's signaling a recession "a little bit more"is the sentiment surveys, he said.

"The PMI surveys typically collapse in a very observable way before the front end of recession comes. They are collapsing sort of right now, but they're still at high levels. Consumer sentiment — same sort of thing."

The unemployment rate is also starting to “flash yellow a little bit."

"Unemployment claims, the report every Thursday, have bottomed out and appear to be in a rising trend. And the unemployment rate now is above its 12-month moving average unemployment rate. And that's a necessary condition to be talking about potential recession," he said.

According to Gundlach, a major indicator of a recession would be if the unemployment rate moved above its 36-month moving average, which sits at 4.3% right now.

"[The] unemployment rate right now is at 4.0%, so it's not terribly far away from that moving average. But we have to watch that very carefully, because if that cracks above, then I think we would say that we're starting to flash yellow for a recession."

The other area to look is the spreads on high-yield debt.

"Junk bond spreads before the last two recessions really blew out by several hundred basis points before the front end of the recession came. We had a scare on that during December, just like the stock market went down 20% plus in most of the indices. But the rebound has been all the way back to the breakdown point. So high yield spreads are starting to look a little less scary."

Julia La Roche is a finance reporter at Yahoo Finance. Follow her on Twitter.