By: David T. Shufflebarger, Senior Partner
Thanks to the good work of the Giving USA Foundation and its research partner, the Lilly Family School of Philanthropy, we know that giving correlates most positively to the stock market. So, it is not unreasonable to wonder about the impact on giving when the markets move markedly.
That was certainly the case in the immediate aftermath of the majority of British voters casting their ballots in favor of leaving the European Union when U.S. markets dropped significantly.
Within 24 hours, pundits were opining that this was such a seismic shift that it would have far-reaching implications for philanthropy. Within two days, the Chronicle of Philanthropy was running articles with these so-called experts arguing that the impact on the markets was so profound that radically new strategies for fundraising would be needed.
In a word, balderdash. As this is written fewer than three weeks after the vote, both the S&P and the Dow have hit all-time highs. Now, there is certainly no guarantee that things will stay that way through the remainder of the year, especially with a hotly contested presidential election in the fall. Equally, however, there is certainly no reason to believe that the next great recession is imminent.
For the most part, the market correlation to giving relates to major gifts. While many smaller donors do indeed have assets in the market, they are typically retirement accounts, not related to discretionary income. And, our experience with major donors suggests that they don’t make snap decisions, either about giving or the impact of the market on their giving. They are both longer-term investors and longer-term donors.
So, don’t assume anything about their behavior or reaction to external events until you have had a lengthy conversation with them. You are likely to find out that no two major donors are the same in the way they think about things since each person’s personal financial situation is different just as each one’s relationship to your institution is unique.
That’s why I was really irritated by those pundits jumping to conclusions and possibly diverting major gift development professionals from going about their good work of listening to their donors in order to build strong relationships that endure through market perturbations.
Balderdash.
