Investor and billionaire Jeffrey Gundlach, who specializes in bonds, said that a number of signs of economic recession are showing themselves in the market recently. Business Insider writes about this.

First, consumer sentiment fell on Friday to a new decade low, and it was a reliable leading indicator of where the economy is headed in the future, Gundlach said. The decline in sentiment, combined with a lack of new economic stimulus for consumers and an expected period of tightening by the Federal Reserve, doesn’t bode well for the economy as a whole, he said.

Another recession indicator to watch for is the yield curve, which tracks the difference between short-term and long-term interest rates. An inversion of the yield curve, in which short-term rates are higher than long-term rates, has historically proven to be a reliable warning that a recession is imminent.

“The yield curve is already causing us to watch closely. Once you get the yield between the 10-year Treasury bond and the 2-year Treasury bond within 50 basis points, you are you have to watch for a recession. And that’s where we are right now,” Gundlach explained.

The case is not helped by the Fed’s current stance, he said, as the central bank is still expanding its balance sheet through bond purchases and has yet to raise rates.

That means that if a recession were truly inevitable, the Fed would have less firepower to mitigate the economic damage because it has no room to cut interest rates.

“I think the Fed should have stopped quantitative easing not next week, not tomorrow, not yesterday, but a year ago. And what we’re seeing is a consequence of all this excessive stimulus,” Gundlach said.

Another sign of recession that Gundlach points out is the beginning of a slow widening of credit spreads, suggesting that confidence in the ability of some companies to service their debt is waning.

It also suggests that credit markets are on the verge of a tantrum that could prevent companies from raising debt at favorable prices.

“It’s a prelude to panic, and unfortunately I think that’s where we are right now,” Gundlach said, warning that the likely further widening of credit spreads would negatively impact stock markets.

“We have a fair amount of recession potential with a flattened yield curve and consumer sputtering based on sentiment, where there is inflation and the consumer has no stimulus. I think the likelihood of weaker economic activity later this year is pretty high,” he said.

Despite his gloomy economic outlook, there is one area where he thinks you can start to slowly start buying: emerging market stocks. Gundlach characterized their relative valuation compared to U.S. stocks as “abnormal,” and that amid the recent weakness in equities, emerging markets seem to be the only area that is rising strongly.