The market managed a positive return for the final month of the year, ending up 1.5%. For 2008 as a whole, the FTSE/JSE All Share Index ended deeply in the red, down 23.2%. The main contributors to this outcome were Resource and Financial stocks which were down 28.4% and 25.7% respectively for the year. Industrial counters proved to be most resilient, falling by 15.7% over the course of 2008. Interest rate sensitive asset classes fared significantly better, outperforming equities by a substantial margin. For the full year, property and cash returned -4.5% and 11.7% respectively while bonds were the top performers, yielding a staggering 17% despite the Rand weakening by 39.8%.

Equity market returns have taken their direction from deep recessionary fears that have gripped the global economy. Domestically, real gross domestic product stalled in the third quarter while prospects for the fourth quarter appear bleak. The Investec/BER Purchasing Managers' Index which reflects the health of the manufacturing sector declined to its lowest level since its inception to 39,5. The Reserve bank's leading economic indicators as well as a range of business confidence Indices all point to a negative economic outlook.

The more interest rate sensitive asset classes have benefited from the more dovish Monetary Policy Committee (MPC) that decided to reduce the repurchase rate by 50 basis points to 11,5%. The statement reflected that the inflation outlook had improved.

Specifically that inflation is expected to continue its downward trajectory, and to return to within the inflation target range in the third quarter of 2009. The Reserve bank expects inflation to average 6,2% and 5,6% in 2009 and 2010 respectively. The benign view is largely shaped by the likely impact of the rebasing and reweighting of the CPI basket to be introduced by Statistics South Africa in January 2009 as well as plummeting oil and food prices. The MPC highlighted that the exchange rate remained the most significant upside risk to the inflation outlook.

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