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First Quarter 2016 Equity Market Review

In the United States, markets continued to experience volatility as stocks suffered declines in January, were relatively flat in February and then rallied nicely in March. As a result, the S&P 500® Index posted a positive first quarter return of 1.35 percent, bringing the one-year trailing return to 1.78 percent. The broader U.S. market, as measured by the Russell 3000® Index, posted returns of 0.97 percent for the quarter and -0.34 percent for the one-year trailing period.

From a sector perspective, performance was biased to the upside as seven of nine sectors within the Russell 3000® Index advanced during the quarter. Returns varied across sectors as the top- and bottom-performing sectors were separated by over 22 percent. Utilities produced a double-digit gain and was clearly the best-performing sector. The weakest performance came from the health care and financial services sectors, which both experienced negative returns for the quarter.

Companies with low beta1, high dividend yield and higher return on equity characteristics generally outperformed during the quarter. In terms of equity market capitalization, large-cap companies outperformed their small-cap counterparts, as the Russell 1000® Index posted a first quarter return of 1.17 percent, while the Russell 2000® Index posted a negative return of -1.52 percent. Style differentiation was evident in the quarter as value-oriented stocks outperformed growth-oriented stocks across most market capitalization segments. In the large capitalization segment, the Russell 1000® Value Index and Russell 1000® Growth Index had quarterly returns of 1.64 percent and 0.74 percent, respectively. In the small capitalization segment, the Russell 2000® Value Index posted a quarterly return of 1.70 percent, while the Russell 2000® Growth Index declined -4.68 percent.

Outside the United States, developed non-U.S. markets underperformed their U.S. counterparts, as the MSCI-EAFE Index (Net), a measure of international developed country returns, posted a quarterly return of -3.01 percent, bringing the one-year trailing return to -8.27 percent. Growth styles outperformed value styles, and small capitalization stocks generally outperformed large capitalization stocks during the quarter. From a country perspective, New Zealand, Singapore and the Netherlands were among the best-performing countries, while Italy and Israel were the worst performers for the quarter. Japan and the United Kingdom posted negative returns for the quarter. From a sector perspective, performance was mixed, as the best performance came from the energy and consumer staples sectors, while the weakest performance was experienced within the financials and health care sectors.

Emerging markets outperformed developed markets by a wide margin and registered a solid positive return as the MSCI Emerging Markets Index (Net) posted a quarterly return of 5.71 percent, bringing the one-year trailing performance to -12.03 percent. From a country perspective, Brazil and Peru were among the best performers, while China, India and Egypt were among the few negative performers for the quarter. Nine of 10 sectors posted positive results during the period. The materials and energy sectors were by far the strongest performers, while the health care and consumer discretionary sectors were the weakest performers for the quarter.

1 Beta is a measure of the volatility, or systematic risk, of a security in comparison to the market as a whole.


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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.