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

The final weeks of the third quarter can easily be characterized as one of the most tumultuous times in the history of the U. S. financial system. An unprecedented level of risk aversion, a sharp rise in volatility, and the forced selling of securities that evolved during the past year escalated into an emotionally charged frenzy in September. Never before has this generation of investors seen the combined quantity, magnitude and velocity of events unfold over such a short period of time.

Much has been previously written about the impact of high-risk, sub-prime mortgages, so we will dispense with that history. The reality of sub-prime mortgages is that instead of diminishing with time and space, the ripples from these securities have grown larger and larger as their effects have expanded deeper into the global financial system. For well over a year, there have simply been more sellers than buyers due to the deleveraging within the financial system and the forced selling of securities by banks, brokerage firms, hedge funds, and others. The selling pressure created serious liquidity problems with regard to the market’s existing inventory of securities, but it has now had far more important ramifications. The ripple effect of sub-prime mortgages has now essentially halted the historically well-oiled process of loan securitization from the originator to the secondary market for all lending activities. Additionally, unprecedented risk aversion has led to a tightening of credit availability so severe that the formation of capital and the flow of capital are disrupted. The crisis has progressed into a systemic problem that has resulted in a downward spiral of confidence and emotion by investors that threatens worsening conditions throughout the financial system.

As of the writing of this commentary, a coordinated effort by leading global economic powers is underway to restore stability to the world’s financial system. Central banks have taken dramatic and unprecedented steps to restore investor confidence and unlock the creation and flow of capital necessary to promote an economic recovery.

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.

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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.