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

The close of 2009 signals how far and fast capital markets have come following the dark days of 2008. Global economies transitioned into a recovery phase in the latter half of the year from one of the worst economic and financial crises in modern history. With growing confidence that financial disaster has been averted and economic growth lies ahead, investors’ appetite for risk revived both stock and bond markets alike, resulting in powerful rallies among all global asset classes during the year.

Both the economic recovery and the stabilization of the financial system have been founded thus far on a powerful combination of inventory rebuilding and the government’s aggressive stimulus policies. U. S. Gross Domestic Product, the broadest measure of the nation’s output of goods and services, turned positive in the third quarter, with growth of 2.2% (annualized). Further, while functionality has not been fully restored to the financial system, confidence has been restored to the point that risk and liquidity premiums in the capital markets are returning to normal.

While the sustainability of the market and economic recovery are highly debated, 2009 represents a welcome relief for investors looking to restore losses suffered during the financial crisis. U.S. stocks, as represented by the S&P 500® Index, rallied over 60% from the trough of the crisis in March to post a return of 26.46% for the year. International stocks were boosted by eye-popping returns in emerging markets to return 41.45% for the year, as measured by the MSCI-ACWI Ex-US Index. The bond markets, despite rising interest rates throughout the year, were lead by a strong recovery in the corporate sector and finished the year with a return of 5.93%, as measured by the Barclays Capital Aggregate Bond Index. Investment-grade corporate bonds, an important source of returns for investors in 2009, returned 18.68% for the year, as measured by the Barclays Capital Aggregate Bond Index — Corporate Sector.

Looking forward, with most market metrics beginning to normalize, the future path of economic growth will hold the key to the direction and magnitude of capital market returns in the periods ahead. Governments around the world have been hugely successful in this recovery with monetary and fiscal stimulus packages designed to stabilize the financial system and restart the global economic engine. 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. Central to that issue will be the economy’s ability to generate enough organic growth, independent of temporary boosts from the inventory rebuilding phase and government stimulus programs, to form the positive feedback loop between business/consumer demand, employment and income needed to support the next economic cycle.

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.