History almost always repeats itself with a few variations thrown in to keep life interesting. Bull markets have a tendency to end with a global inflationary resurgence as it transitions to the next bear market. Now that the financial markets have started to become more volatile, after months of steady gains for most amateurs, people will be considering how to redirect their investments.

Many commodity-based cyclical stocks and ETFs have become irrationally oversold by average investors and are primed for a huge rally. The established emerging markets such as Brazil (EWZ) and Russia (RSX) are trading near four-year lows. They are exhibiting classic signs of undervaluation. The bottoming pattern for heavily commodity based countries, such as Canada (XIU-TC), Australia (EWA) and particularly Brazil, is likely to co-occur with an important resurgence of inflation around the world.

As always, like a pendulum, an extreme in one direction in the financial markets creates a great likelihood of an equal extreme in the opposite direction. When the next rally in commodities occurs it will be a massive surge.

Cyclical securities will capitalize upon their all-time record undervaluation relative to high-yielding assets by staging their strongest rallies during the next half of 2013 and into the early part of 2014.