The financial and real sectors of the economy are inextricably linked; with strong evidence to suggest that there are spillover effects from the stock market to the real economy, with the stock market usually leading the real sector. As such, substantial stock market downturns can negatively impact output. This is of particular concern in an emerging country such as South Africa where maintaining and supporting growth in gross domestic product is critical for the continued development of the country and the allied lowering of poverty levels. Accordingly, for policy makers the ability to forecast market downturns accurately enables them to implement appropriate policies to limit the effects of these stock market downturns on the real economy. Current measures used to forecast share returns such as the Treasury bill yield and dividend-price ratio have limited success in this regard.