The Dow Jones Industrial Average may be back above 18,000, but the bellwether equity index does not reflect the true problems underlying the economy, said David Wright, portfolio manager for the Sierra Strategic Income Fund(SSIIX) - Get Report .

"The economy is gradually weakening and profits will continue to decline modestly over the course of the year," said Wright. "The bond market is better aware of the slowing economy than the stock market as evidenced by the stubbornly low yield environment."

The Sierra Strategic Income Fund, which is a fund of mostly fixed income mutual funds, is up 2.8% thus far in 2016, according to fund-tracker Morningstar. The $397 million fund has returned an average of 2% annually over the past three years, outpacing 92% of its peers in Morningstar's nontraditional bond category. The trailing 12 month yield for the fund is 2.7%, according to Morningstar.

Among the mutual funds held in Wright's fund as of its last reporting period are the Nuveen High Yield Municipal Bond Fund(NHMRX) - Get Report , Cohen & Steers Preferred Securities & Income Fund(CPXIX) - Get Report , DoubleLine Total Return Bond Fund(DBLTX) - Get Report  and the Lord Abbett High Yield Municipal Bond Fund(HYMCX) - Get Report , according to Morningstar.

While he is less than sanguine about stocks, Wright is positive on high yield bonds, which have moved up in concert with stocks since mid-February.

"High yield will improve through the year because it is a good value versus Treasuries, especially with a Dovish Federal Reserve and oil stabilizing," said Wright.

Wright added that high yield municipal bond spreads relative to Treasuries are "exceptional" and are also a "good buffer against a rise in Treasury yields." 

Regarding Treasury bonds, Wright said negative interest rates abroad will continue to support prices and keep yields low.

"The European bond market is in trouble. They have to come here for safety," said Wright. "And if stocks have a cyclical decline then money will flow into Treasuries regardless of yield."