Bullish investors would be well served to pull back their horns because the market is seeing a bearish alignment of technical, fundamental and economic risks coming into focus, said Jason Schwarz, president of Wilshire Funds Management.

"We are in the latter stages of this epic bull market and the traditional equity component of an investor's portfolio we think needs to be intelligently designed to reflect these new realities," said Schwarz.

From a technical perspective, he said there has been a  gradual consolidation and topping out of the S&P 500 this year, which is now trading below the 200-day moving average. On the fundamental side, he said the trend in earnings growth is negative, and that's not simply due to a weak energy sector and the strong dollar environment.  As for the economy, Schwarz said signs of slowing global growth, weaker industrial production and retail sales, and declining levels of inflation are apparent.

For investors holding 60% of their portfolio in equities and 40% in bonds, Schwarz said he prefers growth oriented stocks to value.  In an environment of slower growth, investors are likely to continue to favor companies that can demonstrate higher growth profiles, and valuations are more attractive here for growth equities on a normalized basis looking back 15 years, according to Schwarz.

"We still think valuations for growth companies and growth mutual funds are more attractive than their growth counterparts," said Schwarz. "We think at this stage at the economic cycle growth companies will do better."

Within their 40% fixed-income exposure, investors should opt for high-quality bonds, as opposed to stretching for yield and adding risk in this environment. He said the diversification benefit of Treasuries has diminished because yields are so low and inflation and growth have deteriorated. If there is a liquidity crisis in bonds, equities will likely do worse, according to Schwarz.

Finally, for investors who need to add risk, Schwarz said he prefers high-yield bonds to stocks. Nevertheless, because of his economic concerns, he does not suggest that investors load up too much on high yield either.

"We like high yield right now as a replacement to equity risk," said Schwarz. "But we want to get paid some yield to be there."