Riding two horses.

IN the eyes of high-yield bond fund manager Margaret Patel, stocks are the place to be in 2005. She has put that view into action, taking the helm of a new stock mutual fund while continuing to manage the $8 billion Pioneer High Yield Fund from her base at Pioneer Investment Management Inc. in Boston.

The $16 million Pioneer Equity Opportunity Fund, launched on Dec. 1, will be a "multi-cap, multi-discipline" stock fund, leaning toward smaller and mid-sized companies, she says.

"I feel pretty optimistic about equities this year," Patel said in a recent meeting with financial writers. "People may be surprised by how strong the economy is going to be. I think the returns are going to be on the equity side."

Those are provocative words for investors with a stake in the high-yield, or "junk bond" market.

Pioneer High Yield's Class A shares have posted an above-average 10.3 percent-per-year gain over the past three years, and 12.3 percent return over the past five. Last year, though, the fund returned only 6.7 percent.

"I don't think high-yield is going to have any huge blow-ups or anything like that," Patel said at the meeting. "It's still a pretty good deal, yielding 3 or 3.5 percent more than top-quality bonds. But it's going to be a muted asset class for a while. Average prices of high-yield bonds have never been higher."

The fortunes of high-yield bonds tend to ride with the ups and downs of the economy, rather than the fluctuations in interest rates that set the tone for Treasuries and other blue-chip bonds.

Oddly, the problem for high-yields right now is a symptom of good economic health. With defaults low and company finances improving, investors generally are willing to pay more for higher-risk bonds, preferred stocks and convertible securities, leaving few bargains.

"Instead of borrowing," says Patel, "companies actually have started to pay off debt. What that means is less choice, particularly of good companies."

If interest rates rise this year, Patel was asked, isn't that a problem for stocks as well as bonds? Not necessarily, she said.

All this poses an obvious question for investors: If Patel is more enthusiastic about stocks than bonds right now, shouldn't the clientele think similar thoughts? Some important caveats: If you own a junk fund for income, it may make little sense to jump to anything like Equity Opportunity. Its yield will most likely be a small fraction of Pioneer High Yield's, which has lately been in the 4 percent to 6 percent range depending on how you calculate.

If many Wall Street sobersides are right, stocks as well as bonds may have trouble in the next few years posting anything more than modest returns. Assuming the economy grows, say, 4 percent this year and stocks pay dividends at a 2 percent rate, the market could have trouble gaining much more than 6 percent.