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Second Quarter 2016 Equity Market Review

During the second quarter of 2016, global equity markets registered mixed results as slow economic growth and heightened levels of geopolitical uncertainty continued to weigh on overall results. Despite a volatile end to the quarter due to the surprising Brexit vote results, the S&P 500® Index advanced in all three months of the quarter resulting in an overall second quarter return of 2.46% which brought the year-to-date return to 3.84%. The broader U.S. market, as measured by the Russell 3000® Index, gained 2.63% for the quarter and 3.62% for the YTD period.

From a sector perspective, performance was biased to the upside as seven of nine sectors within the Russell 3000® Index advanced during the quarter. The energy sector produced a double-digit gain and was the best performing sector for the period. The utilities sector also continued to perform well. The weakest performance came from the technology and consumer discretionary sectors which both experienced negative returns for the quarter.

Companies with low beta1, high dividend yield and slower growth characteristics generally outperformed during the quarter. In terms of equity market capitalization, small-cap companies outperformed their large-cap counterparts as the Russell 2000® Index posted a second quarter return of 3.79%, while the Russell 1000® Index posted a return of 2.54%. Style differentiation was evident in the quarter as value oriented stocks outperformed growth oriented stocks across most market capitalization segments. In the large capitalization segment, the Russell 1000® Value Index and Russell 1000® Growth Index had quarterly returns of 4.58% and 0.61%, respectively. In the small capitalization segment, the Russell 2000® Value Index posted a quarterly return of 4.31%, while the Russell 2000® Growth Index advanced 3.24%.

Outside of the United States, developed non-U.S. markets underperformed their U.S. counterparts as the MSCI-EAFE Index (Net), a measure of international developed country returns, posted a quarterly return of -1.46%, bringing the YTD return to -4.42%. Growth styles outperformed value styles and large capitalization stocks generally outperformed small capitalization stocks during the quarter. From a country perspective, New Zealand, Norway and Belgium were among the best performing countries, while Ireland, Italy and Austria were among the worst performers for the quarter. Japan was positive while the United Kingdom posted negative results for the quarter. From a sector perspective, performance was mixed as the best performance came from the energy and health care sectors, while the weakest performance was experienced within the consumer discretionary and financials sectors.

Emerging markets outperformed developed markets and eked out a positive return as the MSCI Emerging Markets Index (Net) posted a quarterly return of 0.66%, bringing the YTD performance to 6.41%. From a country perspective, Brazil and Peru continued to perform well, while Poland and Greece were among the worst performers for the quarter. Seven of ten sectors posted positive results during the period. The consumer staples and technology sectors were the strongest performers, while the industrials and consumer discretionary sectors were the weakest performers for the quarter.

1 Beta is a measure of the volatility, or systematic risk, of a security in comparison to the market as a whole.

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.