Gundlach, chief executive of Los Angeles-based DoubleLine, said in a recent telephone interview that his firm is still "modestly overweight" in emerging markets but took advantage of the risk rally, which he thinks is over.

"I think based on what Yellen said, I would not be surprised if the risk markets reassessed everything in coming days," Gundlach said.

"She was surprisingly dovish. She seemed worried about the state of the global economy. She seems to have no confidence in exactly what the future will bring," he said.

Yellen, in an address at the Economic Club of New York on Tuesday, cited risks to the U.S. economy from global and financial uncertainties, justifying a slower path for rate increases. "Global developments pose ongoing risks," she said.

The dollar-denominated emerging market sovereign debt as represented by the JP Morgan Emerging Markets Bond Index-Global Diversified Composite is up 4.50 percent so far this year through Tuesday.

DoubleLine Capital's holdings of emerging market debt totaled $5.1 billion as of December.

Gundlach, who helps oversee $93 billion at DoubleLine, said Yellen's outlook will result in the dollar trading "incrementally weaker."

"I think it is a good time to sell" risk assets, said Gundlach, who has been a harsh critic of the Fed.

Last week, he criticized Fed officials for changing their stance on interest rates, saying, "They've been flip-flopping like crazy over the past few months."

Gundlach suggested that Yellen and the Fed's policy-setting Federal Open Market Committee should have the same message after an FOMC meeting "for at least two weeks." Gundlach said this would help with the U.S. central bank's credibility.