Markets are Up? More Giving from Institutional Donors?
Stock market gains, over the past six to eight months, have been staggering. To be candid, I did not anticipate this kind of economic growth in the markets. In fact, I predicted against it. There are still some pretty strong economic signs that concern me, but there's no arguing with data. The markets are up dramatically.
From a philanthropic perspective, the increase brings two issues into sight.
The first is individual giving…if stocks are continuing upward over the next several months, appreciated stock where capital gains would be attached are tremendous giving opportunities for donors. They make the gift, and they don't have to pay taxes on the gains. Depending on the stock and the length of time that stock has been in their possession, it could save tens of thousands of dollars in taxes that most people don't want to pay in the first place while allowing them to engage in philanthropic desires.
It's the second area that is easy to note, but hard to predict what the outcome will be regarding giving. Most foundations, trusts, and other organizationally invested funds are more likely than not to be invested with some degree of equities. As much as 60 or 70% (which is a little aggressive for my tastes). With this being true, it would seem a natural connection that foundations, trusts, and other organizationally invested funds would also give out more money. But this is where I say, “slow your boat.”
Any well-run organizationally invested fund, when they make their distribution decisions, is probably running on some type of three-to-five-year average as it pertains to returns. That's in order to keep the funds balanced so they're not giving away too much money at any one time. And while the latest market trends indicate an upward mobility, that lagging series of returns is going to haul down any increases that we might think of today. Also, smart investment portfolio managers are indicating that the market is overfunded to begin with, indicating a pullback is somewhat inevitable. That will cause more conservative viewpoints in allocating resources.
I still say there's an economic downturn coming. Statistics around defaults on houses, increasing credit card debt, defaults on car payments, and request for retirement fund dollars based on emergency requests are all at an all-time high. This might be a bifurcated economic situation, where those with money are making it and those without are getting farther in a hole.
No matter what happens, if market increases continue, it will force institutional donors to consider giving more money to meet basic IRS standards.
