NEW YORK (Reuters) – The high-yield “junk” bond market, which has been a leading indicator of recessions, is flashing “yellow now,” Jeffrey Gundlach, chief executive of Doubleline Capital, said on Tuesday.

Gundlach, who oversees more than $121 billion of assets under management, said on an investor webcast that the signal “may be … a false positive,” but “this is something we’re going to have to watch very, very carefully.”

Gundlach said the current buy-the-dip mentality reminds him of the complacency that took place in the 2007-2008 credit market right before the great financial crisis.

“There’s potential for that here. Because the panic in December was a buying panic – not a selling panic – you never saw the VIX truly spike the way you want for a panic. You want to see that thing over 40. It never made it to 40.”

The CBOE volatility index, which is known as the VIX .VIX and which is often seen as an investor fear gauge, stands around 20.50 points.

Gundlach said Federal Reserve Chairman Jerome Powell on Friday pivoted from pragmatism to a “Powell Put” – that the Fed under his leadership will act like an options contract to prevent stocks from falling too much.

Powell said on Friday that the U.S. central bank “wouldn’t hesitate” to adjust how quickly it lets its balance sheet shrink if it starts to cause problems in financial markets. Powell also said the Fed “will be patient” with monetary policy as it watches how the U.S. economy performs.

Since those remarks, the U.S. stock “market has been throwing a party,” Gundlach said.

On Friday, when markets were also boosted by a monthly U.S. jobs report that blew past forecasts, the Dow Jones Industrial Average rose 3.3 percent while the S&P 500 index advanced 3.4 percent. Both the Dow and S&P added to gains Monday and Tuesday.

Gundlach said the ballooning U.S. federal government debt is “a completely horrific situation” and that the United States could be at a “tipping point” in a “debt-compounding cycle.”

“Are we growing at all or is it all just the increase in debt?” Gundlach asked.

Gundlach on Dec. 11 said that the next move in the dollar was lower and that the S&P 500 index would fall below its February 2018 lows. Both predictions turned out to be accurate.

The DoubleLine Total Return Bond Fund, which Gundlach manages, surpassed 97 percent of its peers in 2018, according to Morningstar data.

(This story has been refiled to delete extraneous line)

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