Most analysts are unwilling to be the first to recommend selling high yielding assets and buy undervalued commodity and cyclical stocks. The reason is that they want to wait for others to do so first.
Since many people think likewise, there will be huge moves especially as commodity shares rebound and everyone attempts to buy them nearly simultaneously. It’s not always fundamental principles that drive the markets, but irrational extremes of sentiment and popularity of a position which consistently lead to these trades reversing toward the mean and beyond.
Presently, exuberant sentiment toward the U.S. dollar is at its highest level since 2001.The professional traders who manage currency trading for large international firms are actually betting on the US dollar going lower in the mid-term time horizon. They are net long currencies of raw material producing countries such as Australia and Canada. However, the speculators are short positioned on the opposite side. One needs to be very cautious following the herd. Piling into high-dividend securities today is a serious mistake as all our reliable indicators point to avoid these assets.
The all-time disparity between high-yielding assets and commodity shares shall be resolved in the not too distant future. Therefore, if you want to “buy low sell high” you need to position yourself in cyclical ETFs or stocks and not follow the crowd.