This column originally appeared on Real Money Pro at 9:23 a.m. EDT on June 1.
NEW YORK ( Real Money) --
"The time of maximum pessimism is the best time to buy, and the time of maximum optimism is the best time to sell."This morning, under the pressure of another weak Chinese economic release, continued unsettling European economic and debt theatres and this morning's very weak jobs report, markets around the world are under pressure. The accompanying build-up in fear and flight to safety have resulted in a continued crushing of commodities and in all-time low yields in German bunds and U.S. Treasuries. Indeed, the yield on the 10-year U.S. Treasury note is far less than half the yield experienced in the 2008-2009 Great Recession and is well below the yield experienced in the Great Depression of the 1920s. Ironically (though painful), these current conditions (and, importantly, the increased pressure and sense of urgency placed on policymakers particularly in light of this morning's data) are precisely the setting in which a rip-your-face-apart rally -- that is, a one- to two-day rally in which the S&P 500 climbs 30 to 50 points and Treasury yields rise by 30 or more basis points -- appears. Am I being a Pollyanna, especially in light of the message of the markets? Perhaps -- indeed, the last half of May was a contrarian's nightmare. But, last night on " Mad Money," Jim "El Capitan" Cramer expanded (and got me thinking) on the sometimes failure of the markets to deliver the accurate message to the markets. I concur with Jim. Markets sometimes freak out (Jim's reference on "Mad Money"). Consider the market opportunities at the generational bottom in March, 2009 or the market opportunities in the summers of 2010 and 2011. Then consider the market's backdrop (and setup) today. With investor sentiment (individual and institutional) so downbeat, Wall Street strategists silenced and crestfallen (according to Merrill Lynch, sell-side strategists are now more bearish on equities than they were at any point during the collapse of the tech bubble or the recent financial crisis), expectations for worldwide economic growth and profits subdued, undemanding valuations, a five-decade high in risk premiums and a growing consensus view of "no way out" of Europe, the dour investment backdrop seems to have the potential for a meaningful surprise to the upside for the U.S. stock market.
-- Sir John Templeton