Election and Stock-Market Jitters Complicate Year-End Fundraising

A flat stock market and a tumultuous presidential election could affect the timing and size of gifts and lead to lower endowment returns in the final quarter of 2016, say fundraising and philanthropy experts.

Some economists are making a more dire prediction, saying a recession is looming in the coming months, which would hurt charitable giving — although other experts say they see little evidence that the economy will falter.

Because of the uncertainty, fundraising experts say charities should start reaching out to donors soon, as many people are starting to make decisions about where to give and how to take advantage of tax deductions before the close of 2016.

Such conversations don’t necessarily have to center on making a gift just yet, although fundraisers and other nonprofit leaders might want to figure out what key donors’ plans are, experts say.

“Fundraising is a competitive exercise, so you want to get out there early and often in the fall and make sure you’re connecting with people and not only asking them for money,” said Bob Kissane, chairman of CCS, a fundraising consultancy.

If fundraisers strengthen their ties to their organizations’ most stalwart supporters, they can prevent being surprised by changes in the economy, said Phil Hills, chief executive of fundraising-consulting firm Marts & Lundy.

“You may start hearing the news before it’s too late to correct course,” Mr. Hills said.

Charities that haven’t started making connections might be caught flatfooted if the economy takes a turn for the worse, experts say.

Call for Optimism

Some fundraisers may look at typical indicators of strong giving and feel some anxiety. After a rocky start during the first six weeks of the year, the stock market rebounded strongly in the spring and has been relatively flat since then. Some stock analysts have warned that a correction may be overdue. Gross domestic product and personal consumption — two other major indicators of giving — grew at a slower rate in 2016 than in previous years.

But many experts don’t see storm clouds.

Slowing growth does not necessarily mean the economy, or giving, is headed for a downturn, said Patrick Rooney, associate dean of academic affairs and research at Indiana University’s Lilly Family School of Philanthropy.

Charities should be “cautiously optimistic” about the year-end period and beyond, he said.

Forecasts predict that the growth rate of charitable gifts in 2016 will be on par with last year, or may fall slightly. Total giving jumped 4 percent in 2015, according to estimates by “Giving USA,” the widely cited annual snapshot of American philanthropy.

Experts made the following predictions:

• Giving will grow by 4.1 percent in 2016, according to an estimate by Marts & Lundy and the Lilly School. Mr. Hills said that although his company will take another look at the numbers at the end of September, he is standing by that prediction, made back in January.
• A midyear report by the forecasting company Atlas of Giving put the growth figure lower, at 2.1 percent.
• In fiscal 2017, which ends next June at most schools, colleges, and universities, giving will grow by 5.2 percent, according to the Council for Advancement and Support of Education. Giving to those institutions in fiscal 2016 increased an estimated 4.5 percent, according to an index released by CASE last month.

Marts & Lundy’s clients, which include higher-education institutions, hospitals, and other large organizations, are not reporting any slowdown in giving so far this year, according to Mr. Hills. Mr. Kissane said he has not heard that his company’s clients are seeing donations slow, either.

Interest-Rate Concerns

Mr. Rooney said there might be a short-term impact on giving if the Federal Reserve raises interest rates, which many believe will happen in December, but there will be an effect on donations only if markets have a strong reaction to such a move — something he does not expect. Instead, he said, markets will probably quickly adapt to any rate change, which is expected to be small anyway.

Mr. Hills said he’s watching the stock market closely. His clients tell him that if the market remains relatively flat, endowment returns might be anemic. Mr. Rooney added that if the stock market remains flat, the wealthy will likely make gifts at the same level they were planning to in the year-end season. But if there’s little growth, that could affect their perceptions of their wealth and make them less likely to make “extraordinary gifts.”

Sue Cunningham, president of CASE, said she thinks the ties fundraisers establish with donors should last longer than temporary portfolio setbacks — which underscores the importance of reaching out to key donors soon.

However, she advises fundraisers to “be sensitive about what people are able to do and in what time frame.”

Worries About the Election

Experts spar over how much this year’s presidential election will affect giving.

A Blackbaud report released earlier this year lent credibility to the view that elections don’t affect total giving much. The report found that people who gave to political campaigns in 2012, the last year there was a presidential race, slightly increased their donations to charities.

Of course, 2012’s contest was much different than this year’s. People may hold back on giving until after the election, when the nation’s future is more certain, Mr. Hills suggested.

Other experts’ concerns largely settle on the GOP nominee Donald Trump and worries about his ability to govern.

Mr. Rooney said Mr. Trump’s plans to scrap trade deals, among other policies, could disrupt the economy.

A win by the Democratic nominee, former Secretary of State Hillary Clinton, would likely bring less uncertainty, said Eileen Heisman, president of the National Philanthropic Trust, which offers donor-advised funds — tax-exempt accounts that donors use to make grants for charitable purposes. The same can’t be said for Mr. Trump, she added.

“The Trump candidacy puts a lot question marks in people’s heads because we’ve never seen anybody quite like him win a presidency,” Ms. Heisman said. “Uncertainty makes people nervous. If Trump wins, it could affect giving next year.”

Giving Early

But others think some donors might be persuaded to give before a new president and Congress are elected and take office to avoid potential changes in the tax rate or other policies.

Ms. Clinton has called for tax increases on wealthy Americans, but she would exempt charitable contributions from a 28 percent cap her tax plan would impose on itemized deductions. Mr. Trump’s latest tax plan caps all itemized deductions at $100,000 for single filers or $200,000 for married couples, although its unclear whether that would include charitable contributions, according to the Tax Policy Center.

Under the current tax code, “for high-income earners, the value of charitable tax deductions is pretty significant, and with tax rates high and potentially going higher, depending on who’s elected, it’s a good incentive to be giving,” said Kim Laughton, president of Schwab Charitable, which offers donor-advised funds.

Ms. Laughton said Schwab is trying to push the message that now is a great time to give, while the markets and economy are stable and while there’s certainty about where tax rates sit.

“We’re very optimistic for 2016,” she said, adding that donors have seen all types of assets increase in value over the past few years: stocks, real estate, collectibles, art. That might make 2016’s end-of-year period favorable — particularly for charities that can sell themselves as adept at handling complex assets.

So far in fiscal 2017, which started in July, Schwab has seen new accounts grow by about 9 percent compared to the same period last year and contributions to existing accounts increase by 10 percent, according to Ms. Laughton.

Ms. Heisman said her organization has done well, too, seeing contributions to its funds increase in the first two months of fiscal 2017 by 41 percent.

Good So Far

Many other charities note that their giving is up so far this year and that they’re not worried about anything specific heading into the year-end period.

Although the Salvation Army has not aggregated fundraising numbers from all its chapters yet, Lt. Col. Ron Busroe, national spokesman for the organization, said he has not heard that many local affiliates are struggling.

One indicator of healthy fundraising: strong performance by online donors. Last year the group saw a 16 percent bump in digital year-end revenue compared with the same period in 2014. This year’s online giving is keeping pace with 2015’s, he said.

Online appeals might be a good route for charities in the end-of-year season and beyond, said Mr. Hills, of Marts & Lundy. Social media and other digital appeals can offer rapid and timely feedback, he said. He predicts those channels will continue to grow in importance for donors of all ages.

“I wouldn’t try to guess at the growth rate this year, but I think you’ll be surprised at how quickly people are shifting to social media and those things for giving,” Mr. Hills said. “And not just the younger people.”

Billion-Dollar Campaigns

Among education fundraisers, “there’s a sense of realism but also a sense of real potential” about the rest of 2016, said Ms. Cunningham, of CASE.

For starters, she sees no sign that the trend for high-goal capital campaigns is slowing down. CASE is currently tracking about 45 capital drives seeking to raise $1 billion or more. “I think that’s a strong indicator of the level of engagement with potential donors,” she said.

She also sees new opportunities to tap into donors abroad, as students from outside North America are increasingly enrolling at U.S. colleges, she said.

One challenge faced by universities: The need to counteract recent media attention of on-campus controversies and protests, which underscores the need for fundraisers to emphasize the good their institutions do, Ms. Cunningham said.

Mr. Kissane, of the consulting firm CCS, urges fundraisers toward optimism. “I would think that philanthropy will be very good this year,” he said. “Will it be better than last year? I don’t know. But I don’t think it’s going to be dramatically worse.”