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

Financial markets continued a dramatic surge during the quarter bolstered by increased investor confidence in a global economy recovery. For the second consecutive quarter, stocks and bonds alike posted impressive returns in anticipation of a successful transition from the troughs of one of the worst financial crises and economic recessions in history.  Investors that persevered through 2008 and the turbulent beginnings of 2009 have been richly rewarded. U.S. stocks, as measured by the S&P 500® Index, returned 15.61% for the third quarter. The six-month return for stocks (ending September 30) was 34.03%, marking it the fourth highest semiannual return in over 70 years. Likewise, long-term U.S. investment grade corporate bonds posted a third quarter return of 12.54%. This brings the six-month return to 29.15%, representing the second largest gain for this segment of the bond market in more than 80 years.

While current economic fundamentals remain weak, the wave of optimism in the capital markets is resting on consistently positive trends in economic data and the promise of future growth. Stronger-than-expected corporate earnings, improvements in the financial sector and the narrowing of credit spreads in the bond markets are among the many positive signs of improving economic stability. It is often said that “stocks climb a wall of worry,” and there are certainly financial and economic challenges ahead that pose significant headwinds for the future. Central banks around the world have committed unprecedented amounts of rescue and stimulus funds in an effort to restart the global economic engine, and it is clear they remain fully committed to this goal. However, there is a future date upon which much of that stimulus must be removed from the economy, and a handoff must be made from the public to the private sector in the restoration of capital into the financial system.

The future path of economic growth will hold the key to the direction and magnitude of capital market returns in the periods ahead. As global economies continue the long process toward recovery, periods of anticipation and doubt about the strength and sustainability of future economic growth will certainly fuel further 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 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.