Dealing with Stock Market Volatility

2018 was a record setting year on the stock market…but not in the way anyone would want.  Given that this volatility is continuing into 2019, here is some advice on what to be thinking about, focusing on and doing to navigate this time of uncertainty.

As we turn the page to 2019, are you finding yourself with a strange sense of déjà vu…as in ‘here we go again’?

It’s been a bit of a roller coaster ride since the 2008 recession and as 2019 gets underway, we find ourselves again dealing with some challenges given the recent stock market volatility. We know that donations from individuals are tied closely to their financial situations and so it’s very possible that jittery and rattled markets could have an impact on donations.

The good side of this déjà vu, however, is that past experience also gives us a roadmap for how to navigate times of uncertainty like these.

And so, if markets continue to experience volatility, here are some thoughts about how to respond, related to internal planning and management as well as in your dealings with donors.

1. Continue to build relationships – When it comes to your stakeholders, and in particular your donors, don’t disappear. Just as ʹstaying investedʹ for the long-term is universally understood as the right strategy for investors during uncertain times, ʹstaying activeʹ in building relationships with donors is the right strategy for charities during these times as well. Continue cultivation and stewardship efforts and keep in touch with donors and any prospects with whom you have been discussing gifts.

2. Listen with respect and empathy – While important to continue to engage with donors and prospects, it’s also critical to listen with an intention to really understand where they are coming from and how they are feeling. Critically assess the solicitations you have planned and consider whether to revisit the timing of your strategy. Donors planning to make gifts of stock may want to wait until they regain lost value, but others will still be in a position to make a gift. You may want to consider offering extended pledge payments.

3. Explore alternatives – As feels appropriate, another option is to suggest alternative gift giving vehicles, including gifts of property, life insurance, or bequests instead of giving cash or stock. Remember to be respectful and sensitive to donors’ needs and preferences but be courageous in offering them the opportunity to contribute. And although it’s a good practice to continue to ask, be sure to adopt a long term view exercising caution not to sacrifice the long term for the short term.

4. Assess your situation – The best advice overall is to ‘Be Patient’ and ‘Don’t Panic’. But, this also isn’t necessarily a time for business as usual and it’s wise to take a moment and plan ahead.  If you haven’t already, now is the time to step back and assess your pipeline, creating a plan for moving forward depending on what you discover.  Get into the weeds of your major gifts pipeline to really determine its value and timing of gifts and the likely impact a volatile stock market might have.

5. Undertake scenario planning – From a revenue point of view, undertake some ‘Good, Better, Best’ scenario planning based on realistic ‘what if’s’, identifying early on what they will mean from both the mission delivery and expense management points of view. To really keep your eye on things, senior management may want to have regular “all hands on deck” meetings to exchange information and make fast operational decisions.

6. Engage the Board – Be sure to engage board members in your both your assessment and scenario planning processes, as well as in crafting strategies that best addresses your situation. Not only does this enable you to tap into their knowledge and expertise to determine the right way forward, it keeps them in the loop and minimizes the chance of nasty surprises later in the year. 

7. Be Realistic – While crucial to remain positive and continue to engage with donors and prospects, it’s also important to acknowledge that you may need to temper expectations. When Canadians feel anxious they spend less and are more cautious with their investments…and that caution extends to their charitable giving.  With this in mind, you may need to adjust your campaign and revenue targets and timelines.

8. The New Normal? – If the last several years have taught us nothing else, they have shown us that we now live in an era where doubt and uncertainty are standard…which begs the question ‘Is this our new normal?’  Organizations are best to accept that uncertainty and disequilibrium are the norm for the foreseeable future and adopt many of the planning practices outlined above as standard practice.

Experience has also told us that philanthropy can and does thrive even in tough times.  Stay focused on what matters most, which is your mission, messaging and donor relations. 

It’s more important than even to keep listening to donors, fostering relations and being present in the community. By sending a confident message while being conscious and empathetic to donors’ financial situations, organizations can even find the right momentum to later motivate them to increase their gifts.

Read more advice about dealing with uncertainty in this 2016 Trends article on the economy or this 2009 Trends article on organizational health.