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

Our current market climate is a harsh reminder of the truth that economic prosperity is cyclical and investments in capital markets are volatile. At the midway point of 2008, worldwide economies and global financial markets are under the strain of several converging factors. The financial crisis, which surfaced well over a year ago in the form of subprime loans, has since hung as a cloud over capital market performance and continues to deepen amid the complex interaction of global markets. Adding to the woes in the financial system are growing concerns about global economic health and inflation.

A positive tone to the market developed early in the second quarter as a result of the tax rebate stimulus and government intervention to shore up liquidity needs among financial institutions. However, that optimism was short-lived under the weight of a global economic downturn and sharply rising energy prices. The unique combination of a threatening recession with rising inflation provided a knockout punch to the capital markets during the later half of the second quarter. For the six months ending June 30, U.S. stocks, as represented by the S&P 500 Index, returned -11.91% and are down close to 20% from the cyclical high in October 2007. Bonds, which often act as a safe harbor during turbulent times, have been only a minor refuge due to the pressure of rising inflation. The Lehman Brothers Aggregate Bond Index posted a return of -1.02% during the second quarter and 1.13% for the first six months of 2008.

The year 2008 is expected to be a period marked by heightened market volatility as global financial systems and economies work through current uncertainties. Understandably, these conditions can cause concerns among investors. Such conditions can lead to emotional decisions that result in untimely, ad hoc changes to investment portfolios that may not be consistent with long-term investment objectives. However, short-term diversions and volatile market conditions need not divert one's attention away from long-term financial goals. Long-term financial objectives which are properly tuned to long-term investment strategies provide the reminder and the assurance that the distance target is the ultimate goal. As has historically been the case, a focused investment discipline, diversification and persistence will likely be the key to weathering this storm.

Market volatility and indiscriminate selling of assets by others often creates investment opportunities that can be captured by insightful investors. Shareholders of GuideStone Funds have the advantage of 30 of the finest institutional investment management firms in the world navigating these difficult waters and taking advantage of opportunities as they surface.

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.

GuideStone Funds shares are distributed by PFPC Distributors, Inc., a registered broker-dealer and underwriter of the funds, 760 Moore Rd., King of Prussia, PA 19406.

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.