Economic forecasts turned ominous in recent days, a reaction to the Trump administration’s tariffs and the stock market sell-off. JPMorgan estimated the chance of a recession at 60 percent in a report titled “There Will Be Blood.”
But what would a downturn look like for charitable giving and nonprofits? We turned to experts and research for clues based on how donors responded to the four U.S. recessions in the past 40 years: the 1990-91 downturn, sometimes known as the Gulf War Recession; the 2001 dot-com bubble collapse; the Great Recession of 2007-9; and the pandemic-related downturn of 2020.
The takeaways include good news and bad:
We’re only weeks into this crisis. The economic downturn that accompanied the Covid pandemic in 2020 felt devastating at the start. Then, the Dow Jones Industrial Average dropped 26 percent in just four days — considerably more than the losses suffered since President Trump announced new tariffs on April 2 this year. In 2020, the economy and stock market recovered enough that giving by year’s end had climbed 9 percent when adjusted for inflation — the biggest spike in nearly a decade, according to the annual “Giving USA” report.
“We don’t know what’s going to happen to the markets,” says Matt Nash, head of the Blackbaud Giving Fund and a leader of research efforts for the Generosity Commission. “If they come down nd hit this correction and then start climbing back up, maybe things will be better by giving season this year. If they don’t and things are still rocky, I think we’re going to have difficulty this year.”
Political and economic uncertainties cloud comparisons to past recessions. The intensity and duration of the Trump administration’s global tariff war are unknown. Nor is it clear whether Congress will extend or deepen tax cuts from the first Trump administration that expire at year’s end. Plus, the wars in Ukraine and Gaza seem to be walking a tightrope regarding peace.
One thing is sure: Uncertainty dampens giving. All the question marks about taxes, policy, and the global situation mean donors are more reluctant to make gifts, says Una Osili, associate dean for research and international programs at the Indiana University Lilly Family School of Philanthropy. “People will postpone their decisions and wait to resolve the uncertainty.”
Uncertainty affects donors whether they are wealthy or middle class, Nash says. “It reduces their likelihood to give because they just don’t know. They don’t feel wealthy in their own mind.”
Giving is tied to stock-market gains and losses — but not equally. University of Chicago economist John List has found that charitable giving increases as the S&P 500 index grows. Donations also will drop when the S&P declines, but the link is not as strong. In his research, List speculates that “many large gifts are contracted years in advance, making it difficult to change the trajectory when times become difficult.”
Also, pressure from fundraisers to “at least maintain past giving levels may cause donors to give more than they would prefer in times of economic hardship,” he wrote.
No two recessions are alike. Economists say the recessions of the early 1990s and early 2000s were relatively short and mild. Giving responded by pausing its steady growth only briefly.
The 2007-9 Great Recession, however, forced a retreat, with the total dropping a record 14 percent over two years. Even after the recession, it took five years for total giving to reach its 2007, inflation-adjusted height of $457 billion.
Osili worries that turmoil is affecting more of the economy this year than it did in the two earlier, milder recessions. “This is a broader-based type of shock,” she says. “It’s not focused on one particular sector or one particular segment of the economy.”
A long, deep downturn could reduce the number of charitable donors over the long run. We’ve seen this happen. In 2000, 66 percent of American households gave to charity — evidence, many said, of the country’s immense generosity. But the Great Recession kicked off a slow slide that has brought the number to just under 47 percent. There are many contributors to this drop, including declining trust in institutions and waning religiosity. But experts say middle-class families simply don’t have the capacity to give as they once did.
Nash notes that the Trump administration says its tariffs will bring manufacturing back to the United States and rebuild the middle class — a good thing for charities. The problem: “It’s a long-term strategy. What happens in the short- and mid-term is where the big question is.”
Nash advises fundraisers to focus on their current donors. “In a downturn, it’s hard to get new ones, so you really want to make sure you hold on to the ones you’ve got.”
Osili also urges organizations to try to continue robust fundraising even as budgets tighten and donors appear to be holding back. During the Great Recession, many organizations suspended a lot of fundraising, curtailing relationship-building events, donor visits, and planned-giving operations.
“It just meant that it was harder to re-engage those donors” after the crisis, she says.
Nonprofits were already bruised and battered before the stock-market losses. Last year closed with a wave of layoffs, program cuts, and even closures. Groups were battling inflation and declining donations as Covid relief money dried up. With the new year, cuts in federal funding began to threaten to swamp budgets. In early findings from a Nonprofit Finance Fund survey to be released in June, about one-third of organizations said they ended 2024 with a deficit, while another 20 percent broke even.
Organizations often want to maintain cash reserves equivalent to three to six months of operating costs, says Nonoko Sato, president and CEO of the Minnesota Council of Nonprofits. “I don’t think many nonprofits — especially small ones — are able to reach even that amount,” she says.
The number of nonprofit closures has been increasing since 2019 in Minnesota, according to rough estimates the council has assembled from state data.
One remarkable fact from the Great Recession: Dissolution of nonprofits was not as high as you might expect. An Urban Institute study found that just 5 percent of charities with at least $50,000 in revenue in 2008 “were gone by 2012, only slightly higher than the 4.3 percent ‘death’ rate in the years leading up to the recession.”
Foundation grant making is likely to go up, not down, in 2025. Institutional grant makers closed last year with an estimated $1.6 trillion in assets — a record high, according to John Seitz, who analyzes foundation investment performance. Because federal law requires a payout of at least 5 percent of assets, foundations will likely give away more than the $105 billion they awarded last year, he adds.
“It’s already baked in,” he says. “If you have a sustained downturn, it’s the following year when you’ll see the effects” reflected in reduced grant making.
Seitz estimates that foundation portfolios are down 7 percent in aggregate so far this year. The damage of the market drop will vary, however, depending on whether a grant maker’s assets are invested broadly. He notes that the latest tax filing for Elon Musk’s foundation indicates its assets are invested almost solely in Tesla, whose stock has plummeted from December highs. Foundation assets likely stand around $8.5 billion — down from an estimated $15 billion at the close of 2024 and $9.4 billion at the end of 2023.
It’s not clear whether contributions to foundations will fall. Over the two years of the Great Recession, giving to foundations dropped 12.5 percent, according to “Giving USA.” But it’s too early to know whether 2025 will see a decline, Seitz says, as donors often determine their giving to their foundations until closer to the year’s end, when tax implications are clearer. If gifts to foundations slow, Seitz notes, there will be “knock-on effects down the road” in terms of reduced grant making.
If history repeats itself, donor-advised funds might increase grant making during a recession. Research suggests that grant making from DAFs is countercyclical. During the Great Recession, contributions to the accounts dropped and their assets declined with the market collapse. But payout rates increased to record highs, and total dollars flowing from the accounts held steady.
“In what was in essence a two-year recession, DAFs were pretty resilient,” says Brigham Young University scholar Dan Heist, co-author of the research with Danielle Vance-McMullen of DePaul University.
Other data points to the same phenomenon: While the Dow Jones Industrial Average fell almost 34 percent from 2007 to 2008, DAF grant making grew 14 percent, according to an analysis by the National Philanthropic Trust, one of the largest fund sponsors.
If there’s a recession this year, DAF grants could have a much bigger role than they did in 2008-9. DAF assets have grown roughly fivefold since before the Great Recession, to more than $250 billion. “Hopefully, DAFs can help fill in the gaps as we go through this,” Heist says.
