By Rodric E. Cummins, CFA , Senior Vice President and Chief Investment Officer

Worldwide financial markets fell sharply in the first quarter under the strain of deteriorating global economies. Concerns of recession have led to aggressive liquidity injections into financial systems by central banks as an antidote to ease the pressures of slowing economic growth. Unprecedented action during the quarter by the Federal Reserve (the “Fed”) rescued the monetary system from a mounting liquidity crisis and brought much needed order to financial markets. Nonetheless, the beginning of 2008 was met with a spurning of risky assets by investors and a strong sell-off in equity markets, which as measured by the S&P 500® Index, plummeted 9.44% during the quarter.

The epicenter of today’s financial stress is associated with problems in the housing and the residential mortgage markets. While these problems surfaced well over 12 months ago, their roots can be traced to low interest rates and the tremendous amount of liquidity that poured into the financial system to stimulate economic growth following the recession of 2001. Mortgage origination abounded and underwriting standards became increasingly relaxed as subprime loans were welcomed into the financial markets. The potential returns from these high risk mortgages were overly tempting for investors awash in liquidity and with a growing appetite for risk and return. Today, the reversal of that virtuous cycle is threatening global economic growth; it has resulted in a repricing of risk throughout the capital markets; and it has broadly impacted liquidity and valuations in both the global equity and fixed-income markets.

As we begin 2008, we are harshly reminded of the cyclical truth that economic prosperity often leads to excesses that, in turn, must be purged from the economic system to make way for future growth. The year 2008 is expected to be a period marked by heightened market volatility and continued aggressive stimulus through monetary and fiscal policy.

Understandably, market environments such as these cause concerns among investors. They can lead to emotional decisions that result in untimely, ad hoc changes to investment portfolios that may not be consistent with long-term financial goals and investment objectives. As has historically been the case, investment discipline will likely be the key to weathering this storm.

With long-term objectives, market volatility and indiscriminate selling of assets by others often create investment opportunities that can be captured by insightful investors. Shareholders of GuideStone Funds have the advantage of collectively having some of the finest institutional investment management firms in the world navigating these difficult waters and taking advantage of opportunities as they surface.

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 Funds shares are distributed by PFPC Distributors, Inc., a registered broker-dealer and underwriter of the funds, 760 Moore Road, King of Prussia, PA 19406. GuideStone Capital Management, a controlled affiliate of GuideStone Financial Resources, serves as the investment adviser to GuideStone Funds.