Bonds were the sleeper-hit investment in 2011, surprising almost everyone with their stellar returns, market watchers say, cautioning they don't expect stellar returns to last and are instead shifting their focus back to stocks.

Bill Gross, head of Pimco, the world's largest bond fund, bet against Treasurys in 2011, only to make an about face and later admit that Treasurys were a good thing.

Meredith Whitney, who called the U.S. financial crisis well before it happened back in the mid 2000s, predicted a meltdown in the municipal bond market.

It never happened.

Mutual funds specializing in long-term U.S. government bonds returned, on average, returned 32.8 percent last year, while a more general bond fund, reflecting the entire U.S. bond market, returned 7.8 percent while the benchmark S&P 500 stock index returned just 2.1 percent, including dividends, the Los Angeles Times reports, citing Morningstar data.

Many analysts point out that despite low interest rates, uncertainty surrounding the European debt crisis sent investors racing to U.S. fixed-income strategies for safety, even after the Standard & Poor's ratings agency stripped the U.S. of its AAA ratings.

Don't get too comfortable with fixed income, analysts.

"Anybody who is in the bond world has to be very careful. It's not easy to see where things are going," says Kurt Brouwer of the mutual fund consulting firm Brouwer & Janachowski, according to the Los Angeles Times.

"It's very hard for anyone today to do anything other than be very diversified."

Stocks, seemed to regain their luster right at the end of 2011.

Stock exchange-traded funds saw inflows of $33 billion in 2011, but most came in the final quarter, according to CNBC.

Pension funds and other institutional investors are often mandated to show 7 percent to 8 percent returns, and since Treasury investments won't shine much longer, stocks are becoming the way to go.

"There's no way to go to an auditor and say, 'I'm going to satisfy my rate of return requirement with a 2 percent government bond,'" says Nicholas Colas, chief market strategist at ConvergEx in New York, according to CNBC.

"The only way the pension funds continue to hold an outsized expectation for return is to buy riskier assets like stocks."