Stock values increased significantly in 2024 – and that is good news for community foundations.
The S&P 500, a widely-used stock index, gained 23% in 2024. Cumulative S&P 500 returns over the past two years (53%) were the best since 1997 and 1998. This helps a community foundation in a variety of ways.
First, it likely means you can award more in grants and scholarships in 2025. Most community foundations have adopted a spending policy that allows distribution of a percentage of assets, and when asset levels rise the dollar value of grants and scholarships rises as well.
Second, your potential donors are now holding more highly-valued assets. Because of significant tax advantages, there is a strong incentive to donate appreciated assets (because you can take a deduction for the full value, while avoiding any capital gains). A strong market will likely boost the value of gifts of appreciated assets that you receive.
Finally, because administrative fees are often tied to asset levels, a rising stock market also leads to additional fee revenue for your foundation’s operating budget. This will allow you to expand your staff, boost your budget in needed areas, or add to your cash reserves.
But remember – stock prices don’t always go up, and you should be sure that you have positioned your foundation to weather a decline in asset values.