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The 'Great Rotation'—Is It Finally Happening?

Christine Balderas | Photodisc | Getty Images

The sell-off in U.S. Treasurys on Tuesday, which took yields to their highest levels in over a year, and record high equities have once again given rise to talk that the "great rotation" may finally be here.

Worries that the U.S. Federal Reserve could slow its massive bond-buying program led the yields on 10 and 30-year Treasurys to jump to their highest levels in 13 months, at 2.07 percent and 3.331 percent, respectively. Added to that, positive economic data out of the world's largest economy fueled the Dow Jones Industrial Average to hit a record close of 15,409.39 on Tuesday.

"We've been waiting for the great rotation out of fixed income, we've been saying it all along, everything we see in fixed income is all risk and no return - people are starting to wake up," Jack Bouroudjian, CEO of wealth management firm Bull and Bear Partners said on CNBC Asia's "Squawk Box" on Wednesday.

Investors are starting to realize the big difference between the Fed "tapering" and "tightening" its easing policy, according to Bouroudjian, who says tapering is much different than draining liquidity out of the market, which is years away.

"I think they're [investors] coming back to their senses, which is one of the reasons we're seeing that great rotation - these large asset allocations out of fixed income into equities - look for that to continue going into the rest of the year," Bouroudjian said.

(Read More: On Second Thought...Maybe Fed Tapering Won't Be So Bad)

Patrick Bennett, forex strategist at Canadian bank CIBC backed that sentiment saying that people are looking at the U.S. economy doing better and "are moving back into the stock market."

Data overnight showed that U.S. consumer confidence in May was the strongest in over five years, while home prices in March accelerated by the most in almost seven years.

(Read More: Soaring Consumer Confidence Points to US Resilience)

Fears of a pull-back in easing by the Fed, which resulted in major U.S. indices posting their first negative close since mid-April last week, were eased after the Bank of Japan and the European Central Bank recommitted to keeping monetary policy accommodative on Tuesday.

Those investors who walked away in May are now "running back" into stocks now, because of the strong economic data, Bouroudjian said.

"What the market is telling us now is that they understand that the Fed and all of these central banks are in a concerted effort and guess what it's working - the numbers are telling us that it's working and if that continues then we can't fight the trend," Bouroudjian added.

Monetary stimulus has supported the benchmark S&P 500 to rise nearly 17 percent this year, while the Dow is higher almost 15 percent in the same time period.

(Read More: Don't Expect Bernanke to Talk Taper...Yet, Economist Says)

Richard Harris, chief executive of Port Shelter Investment Management, said expect global equity markets, especially Asia to catch up with U.S. gains.

"We've probably seen the big gains in the U.S., quite a lot of the gains in Europe, but I don't think we've quite seen the gains in Asia yet, and that's where I think the opportunities are perhaps in the next three to six months," Harris said.

The MSCI Asia index, excluding Japan, is only up 0.3 percent so far this year, lagging U.S. markets.

Joe Magyer, senior analyst at financial services firm Motley Fool, meanwhile, added that while all stocks will not be winners "bonds are the last place I'd want to be for the next five years."

— By CNBC.com's Rajeshni Naidu-Ghelani; Follow her on Twitter @RajeshniNaidu

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