Jeremy Grantham of GMO has released Part I of his Q3 letter (.pdf, dated October 17, 2008). Here's how Grantham sees the market at this juncture:
At under 1000 on the S&P 500, U.S. stocks are very reasonable buys for brave value managers willing to be early. The same applies to EAFE and emerging equities at October 10th prices, but even more so.
History warns, though, that new lows are more likely than not. Fixed income has wide areas of very attractive, aberrant pricing. The dollar and the yen look okay for now, but the pound does not.
Don’t worry at all about inflation. We can all save up our worries there for a couple of years from now and then really worry! Commodities may have big rallies, but the fundamentals of the next 18 months should wear them down to new two-year lows.
As for us in asset allocation, we have made our choice: hesitant and careful buying at these prices and lower.