Many investors have bought high-dividend stocks because they figure the household names involved are almost as safe as bank deposits, but generating more income. They continually confuse dividends with interest, believing them to be virtually the same.

Until June this year, buying high-dividend shares was an outright bubble, with many recent investors believing that they couldn’t lose money. They thought REITs, utilities, consumer staples and, telecom stocks just go up.

Emerging markets have grossly underperformed the developed U.S. markets. Commodity sectors that feed in the developing market- are trading at significant discount. Even oil companies are trading at much lower levels than they historically do.

Recently, prices of U.S. Treasuries have slumped to their lowest levels in more than a year. A steepening of the Treasury yield curve is often followed by higher prices for commodities, the shares of their producers, and related assets which eventually include emerging-market equities.

Cyclical securities will capitalize upon their all-time record undervaluation relative to high-yielding assets by staging their strongest rallies. The biggest losers in percentage terms, since the Fed’s QE announcement in the second week of September 2012, are likely to be transformed into the biggest winners.

Our Conclusion:

Now that almost everyone has crowded into deflation plays – including high-dividend assets and bonds of all kinds – while bailing out of cyclical securities, we will begin (or have already begun) multi-year bear markets for the most popular high-yielding bonds and equities.