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

The powerful rally in the capital markets that began one year ago continued during the first quarter on the strength of an increasingly positive U.S. economic outlook. U.S. equities, as measured by the S&P 500® Index, returned 5.39% for the first quarter. While yields on U.S. Treasury bonds remained virtually unchanged during the period, yields on non-government bonds continued their yearlong march downward thus boosting returns overall for bonds. The Barclay’s Capital Aggregate Bond Index returned 1.78% for the quarter.

While the current pace of economic growth continues to lag previous recoveries, market sentiment is beginning to shift toward a more positive tone, and for good reason. Stronger-than-expected consumer spending, a surge in industrial production, low inflation and the continued presence of highly accommodative monetary and fiscal stimulus polices are creating a very attractive environment for financial securities, particularly equity investments. While consensus remains that long-term economic growth will be hampered by continued deleveraging and high unemployment, economic data suggests for now that a transition is under way from a “recovery” phase to an “expansion” phase of the economic cycle. However, market sentiment remains fragile as investors recognize that the real test to the sustainability of this “goldilocks” environment and the current surge in economic growth will likely occur later this year when the effects of reduced government stimulus will be felt. It is then that the ability and willingness of deleveraging consumer and business sectors to supplant government spending will be tested, and it is then that the financial system will be required to resume its natural, pre-2008 role of facilitating capital creation and fostering economic growth.

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 BNY Mellon 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.