(link)
See quotes below:
Recession risks, which had been elevated during the middle part of 2019, have diminished in recent months...As a consequence, we are now more confident in our baseline forecast that the current window of weakness for global growth will give way to a moderate recovery during 2020.
We will tend to favor U.S. duration over global alternatives, given the relative value and potential for capital gains in U.S. Treasuries and the scope for further Fed easing in the event of a weaker-than-expected macro outcome. While we are broadly neutral on the U.S. dollar versus other G10 currencies, we generally will favor long yen positions in accounts where currency exposure is appropriate
In addition, in asset allocation portfolios, we will look to be overweight large cap over small cap equities.
We favor both U.S. agency mortgage exposures and non-agency exposures. We believe agency mortgage-backed securities (MBS) offer attractive valuation, reasonable carry, and an attractive liquidity profile in comparison with other spread assets. We see non-agency mortgages as offering relatively attractive valuation along with a more defensive source of credit and carry and better market technicals than generic corporate credit exposure. We will also look to have select commercial MBS (CMBS) exposures. U.K. residential MBS (RMBS) also looks attractive on a relative valuation basis.
In currency strategy, we look to be overweight a basket of emerging market currencies versus the U.S. dollar and the euro.
We will tend to favor curve steepening positions in the U.S. and in other countries. U.S. Treasury Inflation-Protected Securities (TIPS) look attractive on a valuation basis
we continue to expect real U.S. GDP growth to slow to a 1.5% to 2.0% range in 2020, from an estimated 2.3% pace in 2019...We look for a modest U.S. reacceleration in the second half of 2020. China’s commitments in the Phase 1 trade deal to purchase $200 billion of additional U.S. exports over the next two years should also support growth in the second half of 2020.
We see euro area growth at around 1.0% in 2020. On balance, we see core inflation remaining close to 1.0%.
The U.K. is set to formally leave the E.U. at the end of January...we expect U.K. GDP growth of 0.75% to 1.25% in 2020,
Japan: We expect GDP growth to slow to a 0.25% to 0.75% range in 2020 from an estimated 0.9% this year...Inflation is expected to remain low in a 0.25% to 0.75% range
China: We see GDP growth slowing into a 5.0% to 6.0% range in 2020 from an estimated 6.1% in 2019.

End of Quote.
======================
What the above means to me?
1) Load on securitized bonds which I have been doing for years (PIMIX,VCFIX,IOFIX,EIXIX. For cash sub use SEMMX)
2) Continue to use US LC as my main equity position which I have been doing for years already
3) If you want to invest in equities abroad go with EM.
4) I will not use TIPS and I don't believe that curve steepening will affect my Multisector funds that much.

One thing about Scott Burns is he has been singing the 2 fund portfolio for years. See here from 2006 - https://scottburns.com/four-milestones-for-successful-investing/. My impression is that the Boglehead philosophy is now a 2 fund portfolio - but back in 2006 it was at least 3 funds, or maybe 5 with a REIT, SV & V lean.

"I dare say a "cyclical" bull market has little meaning to a retiree or anyone within 5-10 years of retirement. 20% pull backs are what people worry about when you use your savings for income or are planning on a retirement date."

@MikeM- This "cyclical bull market" concept with major unspecified pull-backs strikes me as so much baloney. Viewed from that perspective, there has never been anything other than a "cyclical bull market", as long as you adjust the time frame to whatever you need to make that appear to be true.

“It will be surprising if the print edition lasts a year”

@davidrmoran. Thanks. Based on that, I’ve cancelled my new subscription to Kipplingers print and will reinvest the $23.95 in a bottle of Cutty Sark - selling for about the same price here in Michigan. That’s a pretty pedestrian brand. Nothing special. As with magazine subscriptions - there’s not a whole lot available in scotch in the $20-$25 price range.

I like cutty fine, the poor man's J&B, light, sweet, only with a bit more cerealy note, as befits michigan perhaps
do try old smuggler if you can find it there, the very best of the value blends, also, for a little bit more money, duggan's dew, another light sweet high-value highland-oriented blend

@VintageFreak, when @Simon says the bull market will last another 15 years I believe he refers to a 'cyclical bull market'. A confusing play on words I think. There can be numerous bear markets within this cyclical bull.
I'm with you. We are do for a "secular" bear market (a 20% or more drop) because of valuations. Whether this happens in a month or a year, it will happen. Just needs some catalyst to start the trend. I dare say a "cyclical" bull market has little meaning to a retiree or anyone within 5-10 years of retirement. 20% pull backs are what people worry about when you use your savings for income or are planning on a retirement date. IMHO

There’s two separate themes running here, seems to me.
One theme is the long running debate: Active vs. Passive management. That’s been thoroughly debated / raked over the coals here and elsewhere over the years. I have nothing to add.
The other theme seems to be the “gouging” of fund investors by way of “advisor” fees, management fees and operating expenses. Geez - How many here pay an advisor to oversee their fund holdings? He tosses out a 1% figure for management fees (but doesn’t cite it as an average). Even though I’m in actively managed funds, only two (both classified as “alternative investment”) breach the 1% expense ratio: TMSRX and QVOPX. All three from D&C carry ERs under .50%. At TRP my ERs range from .25% for TRBUX to .94% for RPGAX (excluding TMSRS mentioned earlier).
I also think the author may be confused. He references “fund operating expenses” but seems to equate them with a fund’s management fee. As I understand it, operating expenses include trading costs, record keeping and the like. They do exist - but aren’t part of the ER that you and I see. Further, he appears to view the 12b-1 fee as outside the expressed ER, whereas it’s actually part of the expressed ER.
Than there’s this : “ Management fees, on the other hand, pay the salaries of the analysts and other personnel who actually run the fund. They are not capped by law, but investors should be suspicious of funds with fees above 1%.“ ? Those costs would seem to fall under “operating expenses”.
Having a degree in journalism doesn’t seem to get you much now days.

“It will be surprising if the print edition lasts a year”

@davidrmoran. Thanks. Based on that, I’ve cancelled my new subscription to Kiplingers print and will reinvest the $23.95 in a bottle of Cutty Sark - selling for about the same price here in Michigan. That’s a pretty pedestrian brand. Nothing special. As with magazine subscriptions - there’s not a whole lot available in scotch in the $20-$25 price range.

Such articles look very good at top of bull market. Why did this not get published in 2008-2009 or 2002?

Top of the bull market? Are you kidding? We're about 1/3 the way through it. This a Wave 3 Supercycle which will last another 15 years.
A correction is coming very soon. It will be a superb buying opportunity to load up on growth funds for the coming decade. But it will be fast and furious so have your cash ready.

https://www.wealthdaily.com/articles/overpaying-for-your-investments-a-guide-to-mutual-fund-fees/94713
Overpaying for Your Investments: A Guide to Mutual Fund Fees
__Would you feel comfortable with giving up a third of your annual returns in exchange for basic portfolio management?
No?
Well, unfortunately, there’s a good chance you’re already paying that much without realizing it. After all, the average advisor charges an annual fee of roughly 1% of assets under management (AUM), and the average actively managed equity fund has an expense ratio of 1.2%. __
We usually buy index funds for these reasons, you get the average return but you don't pay much in fees, and only ~ 15% of funds do better than you year in and out

ALL CAPS SUBJECT LINE, well; OK !
We're biased at this house; so this will show in the write.
Understanding that value investing is a "buy it low"; we prefer a buy it low, when present into the growth sectors. However, I'm sure decent money has been made with the more stellar value funds.
The below chart compares two active managed funds in the value and growth areas. I can not vouch for the quality of the value fund relative to other similar funds. And the growth fund is a proxy look only, as this fund is closed to new money, with exceptions being inside of retirement plans, existing owners and such.
From Sept. 5, 2008 to March 9, 2009 the following losses were in place for these two funds:
FSLVX = - 49.2%
FDGRX = - 41.9%
Value may yet have a sustained period of superior performance, vs growth. There is much investment ground to be made up.....by value I won't be there to enjoy.
The chart below is a longer view of total return performance.
Chart of FSLVX v FDGRX , begin Nov. 2001 to date.
As always, be curious in life.
Catch

@hank, I subscribed to Kiplinger for a longtime, maybe 30 years, and it was always pay a year or 2 or 3 upfront for the subscription and then it ended. They would send warnings that your subscription was ending and offered preferred pricing before it ended, but never carried it over without your ok. Price was always in the $10-15 per year range over that whole time. They raised it to $20 this year and I opted out. Can't blame them. Even at $20/year they still must be losing money. But, I started subscribing to Barrons this summer and decided I didn't need both. As you said, Kips isn't in the same league as Barrons. Take care and enjoy the magazine.

https://magviral.com/value-stocks-are-making-a-comeback-and-heres-how-to-get-started-early/
VALUE STOCKS ARE MAKING A COMEBACK AND HERE’S HOW TO GET STARTED EARLY
The US stock market now appears to be risky as valuations are rich as sentiment moves higher. But there is a solution for this: Top up unpopular, cheap stocks.
Stocks are expensive or not but it's very difficult to pick winners these days since many pundits are predicting prepare for *near end of cycle* slowdowns and melt downs
Think dji may go up 5 _10% from here for another 12 or 24 months but we ever know

Thanks for sharing @equalizer.
For the price, I’m impressed with some of the things Kiplingers does. Can’t compete with Barron’s of course. Two different leagues. (And it’s easy to access Kiplingers free online.) If anyone’s interested in the print edition, Kiplingers’ site offers it at $19.95 for a year (12 copies). https://personalfinance.kiplinger.com/pcd/Order?iKey=I**W03. Amazon is offering one-year print for $23.95. https://www.amazon.com/Kiplingers-Personal-Finance/dp/B008YJXZLK.
Don’t know if the above offers auto-renew at a higher price - but likely. Amazon’s good at allowing cancellation of subscriptions thru their website. Don’t know about Kiplingers. In the past I’ve had a lot of trouble getting some publishers to stop auto-renew / quit billing my card. Hope this doesn’t come across as a sales pitch. Just trying to share some useful information. Recently subscribed to the Kindle edition - and for $1 monthly (ad-free), quite happy to receive it.
As for the list of funds - an impressive lot. I’m sure many here own some of them. However, I’m not about to dump my much more conservative bunch (suitable for mid-late retirement) to load-up on these high flyers. Brings to mind the old, “Shoulda, Woulda, Coulda” .
Wonder how many of these are closed to new investors anyway or have high minimums?

Healthcare and tech funds dominate.
Vanguard health care #3. Wish they offered it in 529 college plan.
Does anyone have the Wasatch Micro-cap fund?
Which funds do you still like from the list?
https://www.kiplinger.com/slideshow/investing/T041-S001-the-25-best-mutual-funds-of-all-time/index.html

Have a small position in gpgox. Since 2011 return is 13.88%, pretty decent even though a massive bull market period. I want to see returns like Wasatch Micro-cap. 15.96% since 1995.

This post is about the use of Non-traditional bond oefs, as low risk alternatives in a conservative portfolio, compared to short term bond oefs. Typically short term bond oefs, are low risk options, because of their short duration, and their use of investment grade corporates, securitized assets, and cash and cash equivalents. Lower risk Non-traditional bond oefs, typically hold lower investment grade corporate and securitized assets, but will use a wider array of investing strategies, in an "unconstrained" manner, to produce "absolute return" to protect and grow principal. The M* definition of Non-traditional bond oefs is as follows:
"Morningstar Category: Nontraditional Bond":
"The Nontraditional Bond category contains funds that pursue strategies divergent in one or more ways from conventional practice in the broader bond-fund universe. Many funds in this group describe themselves as "absolute return" portfolios, which seek to avoid losses and produce returns uncorrelated with the overall bond market; they employ a variety of methods to achieve those aims. Another large subset are self-described "unconstrained" portfolios that have more flexibility to invest tactically across a wide swath of individual sectors, including high-yield and foreign debt, and typically with very large allocations. Funds in the latter group typically have broad freedom to manage interest-rate sensitivity, but attempt to tactically manage those exposures in order to minimize volatility. The category is also home to a subset of portfolios that attempt to minimize volatility by maintaining short or ultra-short duration portfolios, but explicitly court significant credit and foreign bond market risk in order to generate high returns. Funds within this category often will use credit default swaps and other fixed income derivatives to a significant level within their portfolios."
Four lower risk, non-traditional bond oefs, worthy of consideration as alternatives to short term bond oefs are as follows:
1. MWCRX/MWCIX: It has a standard deviation of 1.02, duration of 1.8, credit rating of BB, rated as Low Risk by M*, has total return of 1 and 3 yrs as 6.36/3.82. The bulk of this fund is investment grade assets, but does hold close to 20% in HY assets.
2. SEMPX/SEMMX: It has a standard deviation of .77, duration of 1.39, credit rating of B, M* risk of Low, has total return of 1 and 3 years as 5.28/5.09. The bulk of its assets are in lower grade securitized assets.
3. CUBAX/CUBIX: It has a standard deviation of 1.26, duration of .99, credit rating of BB, M* risk rating of Below Average, and its total return for 1 and 3 years as 6.25/3.33. The majority of its assets are investment grade but does hold almost 1/3 of its assets in HY, and its assets are in both corporate and securitized categories.
4. PMZAX/PMZIX: It has a standard deviation of 1.05, duration of 1.16, M* credit rating was not rated (typical of PIMCO), but M* risk is rated as Low, and its 1 year and 3 year total return is 5.36.4.06. The majority of its assets are in securitized assets.
Many will not consider anything other than investment grade short term bond oefs, but these non-traditional bond oef funds have performance tracks that are very smooth with upward trajectories, and they have held up very well in downmarket periods, and their total return is very good for a lower risk portfolio role.

Hi @Puddnhead,
Thanks for the shout out. I'm with the Dukester on both counts. The Blond One gets a pass and we move higher through price expansion ... but, not so much on earnings. I've got forward estimates about 176 to 177 for the S&P 500 Index as I write. That puts the Forward Price/Earnings Ratio just short of 19. I've got TTM Earnings at 141. That puts the TTM Price/Earings Ratio at 23.6. Blend the two together and that produces a Blended Price/Earnings Ratio of 21.3%. My thinking is that from a blended perspective 20 is plenty. At least that is the way I govern. And, furthermore, Old_Skeet's stock market barometer closed the week with a reading of 127 indicating that stocks as measured by the metrics of the barometer, for the S&P 500 Index, are extremely overbought.
So, what is fair value for the Index? By Old_Skeet's price to earnings mythology 3180 (now about 5% overvalued). With most of the feeds within the barometer at (or towards) their ceiling that computes to extremely overbought. For me, I'm liking my global growth sleeve as it offers better oportunity with a Forward P/E multiple of 20.8 as comparied to my large mid cap sleeve which has a Forward P/E multiple of 24.2. Both of these sleeves are found in the growth area of my portfolio.
For me, though, better value is found in the growth & income area of my portfolio with my domestic equity sleeve having a Forward P/E Ratio of 14.3 while my global equity sleeve is a little higher at 16.5.
With this, stocks in general are expensive ... and, I'm looking for my value plays, found in the growth & income area, to do more of the heavy lifting as we move through the year.
And ... also remember, most times ... as we move through the year forward estimates usually get trimmed downward.
So what am I to do? With equities having the strong run that they have had of late I've been buying fixed income for more than one reason. The first one is to keep my asset allocation balanced and from becoming equity heavy. And, the second one is because as stocks pullback (during a downdraft) fixed income usually increases in value as some investors sell stocks and move into bonds pushing bond prices higher and their yields lower.
So ... instead of just pondering ... you've now read what Old_Skeet has been doing and why due to elevated stock prices. Thus far, I have not recently been a seller of equities; but, I have been a buyer of fixed income to maintain my asset allocation.
Have a good one ... and, I wish all "Good Investing."
Old_Skeet

Can someone explain why High Yield / Floating are kinda being lumped together above. I'm reading high yield not good place to be but what about floating rate?
Asking because have some of my MIL's money in PRFRX and I viewed it as conservative investment.

I'm quoting from the article the whole narrative "(2) High Yield / Floating Rate: Also called the non-investment grade bond market, high yield or junk bonds, the area of the market performed well in 2019. However, one has to remember where they started. Going into the fourth quarter of 2018, bond spreads were tight, equating with little return for the risk assumed. When the bear market/correction of Q4 2018 occurred, spreads blew out as investors sold out and ran to the safety of Treasuries and cash. As noted above, spreads were well above 500 bps. Today, they are down to ~350 bps which are very tight levels. At these levels, we would say investors in high yield are coupon clippers, meaning that you are likely to receive the yield only with little to no capital gains. The risk is to the downside."
HY correlate to stocks more than other bond categories. If stocks correct then HY probably will too.
Floating rate(=Bank Loans) are still junk bond with very short duration but they might go down too just as they did in Q4 of 2018, see (chart)
Usually, bank loans do better than most other bond categories when rates go up rapidly but rates are not expected to go up rapidly soon. I use BL funds as a trade when I'm convinced rates will go up and why I prefer to use mostly Multisector bond fund see 3 year (chart).
For conservative bond funds I prefer SEMMX,IISIX over PRFRX. See 5 year (chart) and how PRFRX was down much more than these 2 funds in the second half of 2015 and Q4 2018.

Also this:

There was a thread not that long ago linking a paper that claimed M* understated credit risks of bond fund holdings. M* and the authors had some back and forth.
That MFO thread wound up in the bullpen. Here's a M* discussion community thread on the paper.
One fact I got out of the paper was that M* treats nonrated bonds as junk. In contrast, funds themselves use their internal ratings for those bonds when calculating average credit quality. So while M* doesn't even give a style box value for this fund, if it did the credit rating would be low quality (junk), regardless of whether that made sense for the unrated portfolio.
You are correct that M* equates risk with volatility (giving more weight to downside volatility) and disregards the underlying portfolio. Its rationale, according to its methodology, is that such attributes are implicitly accounted for when it classifies the fund:

A style profile may be considered a summary of a fund’s risk-factor exposures. Fund categories define groups of funds whose members are similar enough in their risk-factor exposures that return comparisons between them are useful.

That's certainly suspect with junk munis. My "classic" example is BCHYX, a California junk bond fund that M* lumps together with California longs.
This is more than a random example. M* classifies HICOX as a single state intermediate muni. The manager describes its peers as being "in the High Yield Municipal Debt Fund category." (Annual statement).
Most people seem to take "risk" (really volatility) adjusted returns at face value. You're going further - questioning not only whether volatility is a good metric for risk, but why aren't obvious risk attributes like credit quality explicitly incorporated? Good question!
Just looking superficially at the fund, I can offer a good news/bad news reason for buying/not buying it. It's been managed by the same manager for three decades. One's got to figure that if it hasn't had a major blowup in that period of time (I haven't checked), then he knows what he's doing with all these bonds. (Though as you point out, they're very narrowly focused and the landscape may be changing.)
But any fund, not just this one, with a single manager for that period of time has significant management risk, especially when virtually its whole portfolio consists of unrated securities. In the Annual Statement, he describes himself as "new to Medicare", i.e. mid-to-late 60s.
Since you asked about pricing, see Note 2 in the Annual Statement. It's pretty much boilerplate but goes to describe how bonds are priced. The fund has no level 1 bonds, meaning bonds that trade frequently (so that you can quote the market price directly). Most of the bonds are level 2, meaning that while these particular bonds may not be trading frequently, there are enough "comps" to get a good estimate. Level 3 is divining prices from unobservable data.
"Securities for which there is no last sales price are valued by an independent pricing service based on evaluated prices which considers such factors as transactions in bonds, quotations from bond dealers, market transactions in comparable securities and various relationships between securities, or are fair valued by management. "