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Third Quarter 2015 Equity Market Review

Global equity markets suffered through a difficult quarter as investors continued to weigh the positive indications of a generally improving U.S. economy against the uncertainty over slowing growth in China, Fed policy relating to the timing of potential interest rate hikes and falling commodity prices. In the U.S., the S&P 500® Index advanced in the month of July but declined in the months of August and September, resulting in an overall third quarter return of -6.44%, which brought the year-to-date return to -5.29%. The broader U.S. market, as measured by the Russell 3000® Index, experienced similar negative returns of -7.25% for the quarter and -5.45% for the year-to-date period.

From a sector perspective, performance was unanimously in negative territory as all sectors within the Russell 3000® Index posted negative results during the quarter. Though negative, the defensive-oriented utilities and consumer staples sectors held up reasonably well, while the weakest performance came from the energy and materials and processing sectors which both experienced double-digit losses during the period.

Companies with lower beta and higher quality (as measured by return on equity) characteristics generally outperformed during the third quarter. In terms of equity market capitalization, large-cap companies outperformed their small-cap counterparts as the Russell 1000® Index posted a third quarter return of -6.83%, while the Russell 2000® Index declined -11.92%. Regarding style differentiation, growth-oriented stocks outperformed value-oriented stocks within the large capitalization segment of the market as the Russell 1000® Growth Index and Russell 1000® Value Index had quarterly returns of -5.29% and -8.40%, respectively. Conversely, value outperformed growth within the small capitalization segment as the Russell 2000® Value Index and Russell 2000® Growth Index posted quarterly returns of -10.73% and -13.06%, respectively.

Outside of the U.S., developed non-U.S. markets also struggled as the MSCI EAFE Index (Net), a measure of international developed country returns, posted a quarterly return of -10.23%, bringing the year-to-date return to -5.28%. Small capitalization stocks generally outperformed large capitalization stocks, and growth styles outperformed value styles during the third quarter. From a country perspective, all markets experienced negative performance as Australia, Hong Kong and Singapore in the Asia/Pacific Ex-Japan region were among the weakest performers, while Denmark, Ireland and Italy in the European region were among the strongest performing countries for the period. From a sector perspective, all ten groups experienced negative results during the quarter. The best performance came from the consumer staples and utilities sectors, while the weakest performance was experienced within the energy and materials sectors.

Emerging markets experienced significant declines during the quarter as the MSCI Emerging Markets Index (Net) posted a quarterly return of -17.90%, bringing the year-to-date performance to -15.48%. From a country perspective, Greece, Brazil, Indonesia and China were among the weakest performers, while Hungary, Qatar and the Czech Republic (though negative) were among the strongest performers for the quarter. All sectors posted negative results, and nine of the ten sectors experienced double-digit declines during the quarterly period.


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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.