Global reflation has barely been accepted as an important investment theme, even as those who own high-dividend assets and bond funds have suffered from the early effects of its re-emergence. A major asset shift is underway, although very few investors either recognize its existence or understand its significance. Assets which have become progressively more and more out of favor since they had previously been adored in April 2011, which are the commodity and emerging market ETFs, will likely be the next round of winners.

For more, we suggest you read this intelligent article that appeared recently on the website: Are commodity prices about to explode?

Investors have begun to more persistently sell the shares of high-dividend assets and even U.S. Treasuries (TLT, TIP) which normally rise when stocks are declining. TLT, which is the ETF for long-dated US Treasuries, is now at $108.40 compared to 132.16 on July 25, 2012. This is an essential transformation in psychology as popular high-dividend names which had been recommended by nearly all financial advisors, have surrendered a fair amount of dividend and capital gain over the past several weeks.

Investors are naturally disappointed by losses for holdings which they thought were safe and they are very keen for alternatives. But, so far most investors have not yet realized that the declines for high-dividend assets are an important signal of resurging inflation. They are sitting on cash after unloading their high-dividend securities. They’re all looking at various choices, but remain confused and, as result are temporarily parking their cash in money market funds.

Many cyclical equities have become irrationally oversold and are primed for a strong rally, while physical buying of gold (GLD) and silver (SIL) has once again increased. Investors who wish to own precious metals in many parts of the world are now recognizing the existence of common-sense bargains, unconcerned with support and resistance levels, stop-loss orders, or any other trading algorithm.

We reckon that reflation will become a major theme between now and next winter.