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First Quarter 2014 Equity Market Review

Following a strong year in 2013, global equity markets registered modest gains during the first quarter of 2014 as investors continued to have concerns regarding Federal Reserve policy, weaker U.S. economic data, slower growth in emerging markets, and tensions over the situation in Ukraine. In the U.S., markets were volatile as the S&P 500® Index suffered declines in January and then recovered in February and March resulting in an overall quarterly return of 1.81%, which brought the one-year trailing return to 21.86%. The broader U.S. equity market, as measured by the Russell 3000® Index, posted similar returns of 1.97% for the quarter and 22.61% for the one-year trailing period.

From a sector perspective, performance was biased to the upside as eight of the nine sectors within the Russell 3000® Index advanced during the quarter. The best performance came from the utilities, health care and technology sectors. The weakest performance was experienced within the consumer groups and the producer durables sector. The consumer discretionary sector was the only sector that registered negative results for the quarter.

Companies with lower earnings growth and higher dividend yield characteristics generally outperformed during the quarter. In terms of equity market capitalization, large-cap companies outperformed their small-cap counterparts as the Russell 1000® Index posted a first quarter return of 2.05%, while the Russell 2000® Index advanced 1.12%. Style differentiation was evident in the quarter as value oriented stocks generally outpaced growth oriented stocks. In the large capitalization segment, the Russell 1000® Value Index and Russell 1000® Growth Index had quarterly returns of 3.02% and 1.12%, respectively. In the small capitalization segment, the Russell 2000® Value Index posted a first quarter return of 1.78% and outpaced the Russell 2000® Growth Index by 130 basis points.

Developed non-U.S. markets also ended a volatile quarter with a modest, positive return as the MSCI-EAFE Index (Net), a measure of international developed country returns, posted a first quarter return of 0.66%, bringing the one-year return to 17.56%. From a country perspective, the best performance was experienced in countries such as Israel, New Zealand and Denmark. Japan generated the weakest performance for the quarter, while the U.K. also ended the period in negative territory. From a sector perspective, six of ten sectors were positive during the quarter. The best performance came from the utilities and healthcare sectors, while the telecommunications and consumer discretionary sectors were the worst performers during the period.

Emerging markets underperformed developed markets and registered a negative return during the quarter as the MSCI Emerging Markets Index (Net) posted a quarterly return of -0.43%, bringing the one-year trailing performance to -1.43%. Some of the best performing markets were in the Asia/Pacific Ex-Japan region and included countries such as Indonesia, India and the Philippines. Russia was the weakest performing emerging market during the period, followed by Hungary and Mexico. Six of ten sectors posted negative results during the period. The telecommunications and energy sectors were the weakest performers, while the information technology and consumer discretionary sectors were the best performers for the quarter.

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 Capital Management, a controlled affiliate of GuideStone Financial Resources, serves as the investment adviser to GuideStone Funds.

You should carefully consider the investment objectives, risks, charges and expenses of the GuideStone Funds before investing. A prospectus with this and other information about the Funds may be obtained by calling 1-888-GS-FUNDS (1-888-473-8637) or downloading one. It should be read carefully before investing.

GuideStone Funds shares are distributed by Foreside Funds Distributors LLC, not an advisor affiliate. Foreside is not a registered investment adviser and does not provide investment advice.