The pessimism that dominated markets in August, was replaced by a renewed optimism in September, as the Federal Reserve said that it was "prepared to provide additional accommodation if needed to support the economic recovery." This was a signal about the potential for more quantitative easing and equity markets responded positively. The FTSE/ JSE All Share Index returned 8.7% for the month, with the subsectors Industrials returning 9.0%, Resources 7.8% and Financials returning 7.9%. Large caps, the laggard over the past 6 months, were the best performer on a market capitalisation basis. The FTSE/JSE Top 40 index returned 9.1% for the month, while the FTSE/JSE Mid Cap Index returned 7.0% and FTSE/JSE Small Cap Index returned 6.3%.

Bonds continued to perform positively in the favourable interest rate environment. The South African Reserve Bank reduced the Repo rate by a further 50 basis points during the month to 6.0% per annum, citing the improved inflation outlook as creating sufficient room for monetary policy to provide additional stimulus to the somewhat fragile South African recovery.

Property benefited from both the downward adjustment in interest rates and the favourable environment for equities. The SA Property Index returned 3.5% for the month.

The rand gained further ground against the US Dollar during the month, appreciating by 5.6%, but lost 1.3% to the Euro.

Risk aversion appeared to be the main theme in both the international and the local equity market over the past quarter which resulted in a sell off across risky assets. This was as concerns over a slowdown in China and the Eurozone due to the sovereign debt crisis in the peripheral euro areas weighed on emerging market growth prospects, and affected South Africa which is far from insulated should global growth slow.

As a consequence, the SA Equity Market was down 3.17% during the month of June and posted a negative return of 8.17% for the quarter. The Resources sector, the laggard during the last quarter, continued to be the main detractor of value, losing close on 4% for the month of June and 12% during the quarter.

Short term money market rates returned 1.73% outperforming the bond market by close on 60bps during the past quarter. The best return by far was seen in inflation linkers, where the Inflation Linked Bond Index returned 5.13% over the quarter and an impressive 1.30% for the month of June.

The SA Property market did not escape the run experienced in the equity market during the quarter, and returned 0.64%, while the rand also followed risky assets weaker losing 5.19% vs. the US dollar over the quarter.

As a result of ongoing concerns about the sustainability of the market recovery, the SA Equity Market had a difficult start to the year; during with it posted a negative return of -3.50% in January. This was led by a correction in the Resources sector which lost 6.41% together with the Industrials sector which was down by 2.55%. These losses were partially offset by the Financials sector which was up by 1.24%. Howe ver, by mid February, the market correction which began during January appeared to dissipate, and the JSE All Share Index ended the quarter with a positive return of 4.48%. This was on the back of a continued trend in sectoral rotation in performance, as Financials, the laggard of last quarter, where the main driver of performance with an impressive return of 9.87%. The Industrials sector also held up relatively well and posted a return of 6.17% for the quarter. The Resources sector, the main driver of performance during the last quarter, lagged with a return of 2.09% for the quarter. This was despite having a strong run in March, during which the sector was up 10.17%, Going forward, the biggest concern appears to be the shape in which Government finances are around the globe, given that the underlying drivers of the corrective phase that was experienced during the beginning of the year where centered on markets' concerns regarding the timing and impact of any withdrawal in stimulus. However, as weak as government finances appear, so impressively strong are some Company Balance Sheets with healthy cashflow and robust profit margins. This places a huge dilemma for stock pickers, as they have to decide whether to back, bottom-up or top-down forces.

During the 4th quarter of 2009 the South African Equity Market continued to support a trend of strong returns established from its lows in March 2009 and delivered an impressive gain of 11.4% for the quarter and 32.1% for the year.

There was a sector rotation in performance, with the Industrials sector, the main driver of performance during the 3rd quarter, lagging behind the Resources and Financials sector. In the 4th quarter Industrials returned 0.4%, while Resources returned 16.7% and Financials 6.5%.

On a market capitalisation basis, Mid Cap stocks, the star performer of 2009, returned 5.6%. Large Caps, as represented by the FTSE/JSE Top 40 returned 12.5% for the quarter and Small Cap stocks returned 6.6%.

South African Bonds struggled over the quarter, with the All Bond Index failing to outperform cash. The STEFI Composite Index returned 1.9% for the quarter, while the All Bond Index only returned 1.1%. Inflation Linked Bonds, as measured by the Barclays Inflation Linked Index, also underperformed cash over the quarter, returning 0.20%, as the annual inflation rate continued to trend downwards.

Property continued to deliver strong performance, returning 4.05% over the quarter and 14.07% for the year. The rand continued to surprise all by its strength and appreciated by a further 1.5% against the US dollar and 4.5% against the Euro, to become the best performing currency for the year.