CONSIDER THE FOLLOWING:
Officially, inflation is 5.4% ( January 2013 figure, according to www.resbank.co.za). Now we know that over long periods, the different asset classes give us different real returns with the long-term average for equities being around 7%-9% per annum. So based on an inflation figure of 5.4% we should expect the equity market to be returning around 14.4% per annum max (5.4%+9%). The 30-year return f igures support this number.
However, the 10-year figures do not. In fact, 10-year equity market nominal returns are just under 19% per annum and this should put the CPI number at around 10%. Officially, CPI over this period has been 5.3% which means that the markets have therefore given real returns of just