Emerging markets led global stocks to their 4th consecutive monthly gain in September, the longest streak since 2007. This handed equity investors better returns than bonds, commodities and the dollar, and pushed them ahead for the year.

Unprecedented steps by central bankers to fix the slowest global growth since 2009 sent investors to equities. On 13 September the US Federal Reserve pledged a 3rd round of asset purchases to revive the economy after unemployment stayed above 8% for 44 months. In addition, the European Central Bank announced an unlimited bond-buying program last month, the Bank of Japan unexpectedly expanded its asset purchase fund and India's central bank lowered the cash reserve ratio for lenders.

The S&P 500 rallied 2.6%, touching the highest level since 2007 and bringing its 2012 advance to 16%. The S&P GSCI Spot Index of raw materials rose 11% during the 3rd quarter, rebounding from a 13% drop in the previous three months. The US Dollar Index lost 1.6%. US 10-year treasury yields closed at a yield of 1.64. Lastly, Brent Crude fell 2.21% to end at $113.30 a barrel.

On the local front inflation-linked bonds were the best performing asset class in September posting a 2.65% return, equities held 2nd place, returning 1.64% while nominal bonds returned 0.9%. The money market benchmark Stefi Composite returned 0.4% in September.

The Reserve Bank MPC left the repo rate unchanged 20 September. Although the accompanying statement remained bullish, it highlighted the fact that the surprise cut in July was pre-emptive. We think that recent balance of payments data were sufficiently alarming to stay the MPC's hand with respect to further easing.

Consumer inflation nudged higher in August, printing 5% compared to 4.9% in July. The outcome was generally expected. We see consumer inflation moving broadly sideways through to a bottom early next year, with a rising trend thereafter. While inflation is expected to remain within the Reserve Bank's 3% to 6% target band through to the end of 2014, the rand poses a significant upside risk to the inflation outcome.

The Reserve Bank MPC's September statement shows that the committee's bias remains one of easing; a stance that is in line with that of most other central banks. However, we remain of the view that further easing requires a meaningful deterioration in the MPC's outlook on economic fundaments, and confirmation that the current account is less problematic than its 2nd quarter print suggests, and remains easily funded.

Global stocks and the euro surged, oil had its biggest daily gain since 2009 and Spanish bonds rallied after European leaders reached an agreement that eased concerns that banks will fail. The S&P 500 Index advanced 3.96% to cap its best June since 1999. The euro rallied 2% against the dollar, the most since October 2011. Spain's two-year yield plunged more than a full percent. The S&P GSCI gauge of 24 commodities rose 6.3% in the final week of June, its biggest weekly gain since July 2009, as Brent crude surged 7.65% to $97.55 a barrel. Spot gold prices rose $11 to end the month at $1 577 an ounce. U.S 10-year treasury yields rose 15 basis points (bps) from its record low to 1.64.

On the domestic front nominal bonds were the best performing asset class, posting a return of 3.32%, while equities were the 2nd best performing asset class, returning 1.85%. The money market benchmark Stefi composite returned 0.44%. The money market curve continued to flatten, as was the case in May. The 12- and 6-month NCD yields declined 13 and 20 bps to 5.875% and 5.6% respectively, while 3-month rates drifted 3 bps to 5.575%.

SA's inflation picture has remained very encouraging, despite the recent weakness in the currency. Consumer inflation has been on a declining trend since its peak of 6.3% in January, falling to 5.7% in May. Likewise, producer inflation has remained on a declining trend since its peak of 10.6% in October 2011, falling to 6.6% in April and May. Both consumer and producer inflation are expected to remain on a declining trend, with consumer inflation likely to fall below 5% by the 4th quarter of 2012, and remaining well-within the target range over the Reserve Bank's policy horizon.

Inflation is expected to remain well-behaved in a generally lacklustre growth environment with a restraining output gap, subdued global inflation, a combination of food and petrol price disinflation and lower electricity tariff increases.

The Reserve Bank Monetary Policy Committee (MPC) left the repo unchanged at 5.5% on 24 May, as was generally expected. The benchmark repo rate has been unchanged since November 2010. Rate expectations have changed substantially over the course of 2012. At the beginning of the year expectations were that the MPC would start hiking the repo rate by the 4th quarter of 2012, according to the median expectations of the monthly Reuters Econometer Poll. The latest poll shows that the MPC is expected to start hiking rates in the 4th quarter of 2013. We expect that a combination of relatively weak domestic growth, on-going concerns about downside risks to global activity, and a more favourable local inflation outcome would continue to weigh on monetary policy over the remainder of 2012 and 2013. Under this backdrop, we think that the MPC is likely to keep the repo rate unchanged until 2014, with a gradual hiking cycle commencing in that year.

We continue to prefer investing in longer dated floating rate instruments as we believe that the market has discounted too much of a chance of future repo rate cuts, therefore making fixed rate notes unattractive.

The best 1st quarter gain for the S&P 500 Index since 1998 sent US stock returns above gold by the highest margin in more than a decade, a sign of growing investor confidence in corporate profits as analysts raise earnings' estimates for the 1st time this year. The S&P 500 climbed 12% for the quarter, 5.3% more than gold for the widest gap to start a year since 1999. US Treasuries slipped 1.3%; the benchmark 10-year notes closing at a yield of 2.21%. Gold closed at $1 663 an ounce, while crude oil fell to 6 week lows as prospects around a potential accord on tapping strategic reserves gathered momentum. The Euro held steady versus the dollar closing at $1.3343.

Locally the Monetary Policy Committee kept the repo rate at a record low of 5.5% for the 16th consecutive month. The MPC statement had a more dovish tone compared to the January one. The Reserve Bank revised down its anticipated trajectory for consumer inflation, including a lower peak than previously anticipated. Global uncertainty continues to haunt the MPC despite tentative signs that the global economy is performing better. And, although local activity has also picked up pace over the final quarter of 2011, the output gap remains. There are also signs that consumer spending may be losing some momentum.

Consumer inflation for February was 6.1%, versus an expected 6.4%. The below consensus number was mainly driven by lower than expected food price increases. Producer prices increased by 8.3% in February, with meat prices at agricultural level continuing to decline. Growth in money supply and credit were up in February. Credit growth is still largely being driven by unsecured lending.

The All Bond Index returned 0.1% for the month. The yield on the R186 (maturing 2026) rose 23.5 basis points (bps) to close at a yield of 8.365%. The short dated R157 (maturing 2015) closed at a yield of 6.69%, up 9 bps from the February close. So far in 2012, foreigners have bought R16.4bn worth of bonds. Money market yields bucked the recent steepening trend, with demand for 12 month paper pulling down the longer end of the curve by 3 bps, printing a close on the 12 month NCD rate of 6.225%. The money market benchmark Stefi composite returned 0.45% in March.

We remain of the view that rates will remain unchanged for 2012, with the hiking cycle commencing in the 2nd quarter of 2013. We continue to favour long dated fixed rate instruments, and will keep the fund at maximum duration to take advantage of the steep money market curve.

After a tumultuous year in world markets, December was comparatively mild. Europe's sovereign debt crisis remained in the spotlight with the European Central Bank lending euro-area banks a record amount for 3 years (489 billion Euros in 3 year loans, the most it had ever lent in a single operation) in its latest attempt to keep credit flowing in the economy.

The S&P 500 Index ended up 0.85% for the month, leaving the benchmark index for American equities virtually unchanged for the year. US Treasury yields fell in December on concern that Europe's debt crisis will curb global growth. The US 10-year treasury yield declined 19 basis points (bps) closing the month at a yield of 1.87%, within a quarter-percentage point of its record low. The Euro closed the month at $1.29, down 3.61% for the month. Gold closed at $1 563 per fine ounce, completing its 11th consecutive annual gain. Brent crude fell 3.36% to close at $107 a barrel as Chinese manufacturing contracted for a 2nd month, spurring concern that demand from the world's 2nd largest crude-consuming country may be slowing.

Domestic consumer inflation accelerated to 6.1%, breaching the Reserve Bank's target range for the 1st time in almost 2 years, as higher fuel prices and a weaker Rand boosted costs. The producer inflation rate fell to 10.1% from 10.6% in October, the 1st decline in 7 months. Credit growth increased by 6.22% in November, the most since April 2009, as the Reserve Bank kept the lending rate at a 30-year low. Money supply growth (as measured by M3) increased by 7.23% in November.

The yield curve ended the month virtually unchanged. The R186 (maturing 2026) closed down 1 bp at 8.47. The R157 (maturing 2015) closed at 6.72%, down 4 bps for the month. Nominal bonds returned 0.7% while Inflation-linked bonds were the best performing asset class in December, posting a return of 2.03%.

A weaker local currency led speculative accounts to reduce bets on possible further interest rate cuts. As a consequence, money market yields traded higher, with the 9-month NCD rate closing up 10 bps to a yield of 6%. The 12-month NCD yield increased 8 bps to 6.12%. The money market benchmark Stefi composite returned 0.45% for the month.

We maintain the view that policy rates will remain on hold for the foreseeable future and see the recent increase in short rates as attractive investment opportunities. We continue to favour the 3-month area of the curve and will remain as fully invested as possible.