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Third Quarter 2013 Financial Market Review

The bull market in equities continued its 4½ year run in the third quarter. With slow and steady global economic growth continuing, the third quarter rally was fueled by improvements in the outlook for Europe as well as the somewhat surprising announcement in September that the Federal Reserve will, for now, maintain its generous monetary policies. Barring a major setback in economic growth, the Federal Reserve’s (“Fed’s”) action will likely not change the eventual need to reduce monetary stimulus from the financial system. But for now, the action by the Fed was a relief to investors that have become increasingly concerned over another round of discord in Washington, a change in leadership at the Federal Reserve and geopolitical risks around the world.

For the quarter, global equity returns were strong. Stocks were led by non-U.S. markets as the MSCI ACWI Ex-U.S. returned 10.09%. In the U.S., the S&P 500® Index posted a return of 5.24% for the period, bringing the year-to-date return to 19.79%. Regarding fixed income investments, both individuals and institutions continue to feel the effect of low interest rates. The low interest rate environment, with its recent bias toward higher rates, continues to provide very little traction for bond returns. For the quarter, the U.S. bond market, as measured by the Barclays U.S. Aggregate Bond Index, returned 0.57%. For the 12-month period ending September 30, bonds returned -1.68%, the lowest rolling one-year performance for bonds since 1994.

The cloud overhanging the financial markets at quarter end was the ongoing debate in Washington about the government shutdown and the impending debt ceiling. As those political issues are expected to be favorably resolved in the near term, we can expect the Fed to resume its intended goal of reducing the massive stimulus provided over the past five years. Although it may introduce more volatility into the capital markets, we continue to believe this shift in Fed policy is good for investors long term. This reduction in stimulus should not be mistaken for a move to tighten monetary policy. In fact, we believe the long-term deleveraging cycle, which is firmly entrenched in the world’s economic affairs, will require the Fed to continue promoting strong economic growth. This should provide both support and opportunities for risky assets held by long-term investors that have the patience, discipline and risk tolerance to ride out periods of high market volatility.

You should carefully consider the investment objectives, risks, charges and expenses of GuideStone Funds before investing. For a copy of the prospectus with this and other information about the funds, please call 1-888-98-GUIDE (1-888-984-8433) or download a prospectus. You should read the prospectus carefully before investing.

 S&P 500® is a trademark of The McGraw-Hill Companies and has been licensed for use by GuideStone Funds. The Equity Index Fund is not sponsored, endorsed, sold or promoted by Standard & Poor’s and Standard & Poor’s makes no representation regarding the advisability of purchasing the Equity Index Fund.

All indices are unmanaged and not available for direct investment. Index performance assumes no taxes, transaction costs, fees or expenses. This update is prepared for general information only and it is not to be reproduced.

GuideStone Capital Management, a controlled affiliate of GuideStone Financial Resources, serves as the investment adviser to GuideStone Funds.

You should carefully consider the investment objectives, risks, charges and expenses of the GuideStone Funds before investing. A prospectus with this and other information about the Funds may be obtained by calling 1-888-GS-FUNDS (1-888-473-8637) or downloading one. It should be read carefully before investing.
GuideStone Funds shares are distributed by Foreside Funds Distributors LLC, not an advisor affiliate. GuideStone Capital Management, LLC, an affiliate of GuideStone Financial Resources, provides investment advisory services for the funds.