Want more insights? Join author Peter J. Klein on April 29, 2025, from 2:00–3:00 pm ET for the webinar: “Tariffs? The Markets Are in Flux. What Now?” Register here.
In today’s unpredictable market and economic environment, foundations face distinctive challenges in advancing their missions amid ongoing market volatility. How can they better understand this uncertainty—especially the potential impact of tariffs—on their financial health and long-term sustainability?
A Quick History Lesson
For nearly 40 years, declining interest rates served as a powerful tailwind for investors, helping to propel financial markets. But that era has ended—and a new environment calls for a new playbook.
The Era of Declining Interest Rates
From the early 1980s through 2020, interest rates steadily declined, creating a disinflationary backdrop fueled by globalization, technological innovation, and other structural forces. In this climate, the Federal Reserve’s rate cuts proved an effective tool during economic downturns.
A New Regime: Rising Interest Rates and Changing Dynamics
Today, rising rates are reshaping the economic landscape. Trends such as deglobalization, reshoring, climate change, and decarbonization are driving structural change. Historical comparisons show that during the rising rate period from 1945 to 1982, the S&P 500’s compound annual growth rate (CAGR) was notably lower than during the declining rate era from 1982 to 2020.
Implications for Investors
In today’s shifting environment, investors must take a more active and research-driven approach, with an emphasis on fundamentals and value-oriented strategies. At ALINE Wealth, we anticipated the pivot toward inflation-sensitive sectors early on—favoring cash and exercising caution with bonds. With today’s interest rates, cash offers both stability and flexibility in portfolio construction.
We continue to recommend a cautious stance on intermediate– to long-term fixed income and see opportunities in dividend growth, value-style equities, real assets, infrastructure, and resource-focused companies—including those in the water sector.
Tariffs: A Growing Concern
Tariffs are essentially taxes on imported goods, and their impact on the global economy can be significant. As we’ve seen in recent weeks, rising tariffs can drive up costs, contribute to inflation, and disrupt international trade—creating broad economic uncertainty.
Looking ahead, persistent inflation could affect both the investment performance of foundation portfolios and the day-to-day expenses of the nonprofits they support. In a worst-case scenario, escalating trade tensions could lead to deglobalization, trade wars, and major disruptions in global supply chains.
Impact on Foundations
- Rising Costs: Foundations may encounter higher prices for goods and services, shrinking their operational budgets and reducing funds available for grantmaking.
- Inflation Pressures: Persistent inflation further erodes the purchasing power of foundation assets, limiting their ability to support their missions effectively.
- Global Disruptions: Trade wars and deglobalization could disrupt supply chains and raise costs even further, weakening the buying power of
Strategic Recommendations for Foundation Finance Committees
What steps can foundation leaders take in this environment?
- Stay Alert: Avoid the trap of status quo bias. Now is the time to be proactive, not complacent.
- Understand Your Portfolio: Know what you own and ensure each investment aligns with a clear strategy.
- Inflation-Hedging: Explore inflation-protected investments such as precious metals and commodities.
- Defensive Positioning: Hold a meaningful allocation in cash. It can provide stability and allow you to act on opportunities during market downturns.
Supporting Nonprofits
Foundations can also strengthen their impact by helping grantees navigate this economic uncertainty. Offering support with budgeting, cash flow management, and financial planning can better equip nonprofits to weather inflation, rising costs, and shifting economic conditions.
We welcome your questions and reflections on this evolving investment landscape. Our team is here to support you in navigating these changes and making informed decisions to safeguard your nonprofit’s financial future.
Want To Go Deeper?
Join Peter J. Klein live on Tuesday, April 29, 2025, from 2:00–3:00 pm ET for the webinar, Tariffs? The Markets Are in Flux. What Now? He’ll break down what current market shifts mean for foundation investments and operations—and how to plan ahead with confidence. Register now to reserve your spot.
About the Author
Peter J. Klein, CFA®, CRPS®, CAP®, CSRIC®, is the chief investment officer of ALINE Wealth and president of the Claire Friedlander Family Foundation.
ALINE Wealth is a group comprised of investment professionals registered with Hightower Advisors, LLC, an SEC registered investment adviser. Some investment professionals may also be registered with Hightower Securities, LLC, member FINRA and SIPC. Advisory services are offered through Hightower Advisors, LLC. Securities are offered through Hightower Securities, LLC. This is not an offer to buy or sell securities. No investment process is free of risk, and there is no guarantee that the investment process or the investment opportunities referenced herein will be profitable. Past performance is neither indicative nor a guarantee of future results. The investment opportunities referenced herein may not be suitable for all investors. All data or other information referenced herein is from sources believed to be reliable. Any opinions, news, research, analyses, prices, or other data or information contained in this presentation is provided as general market commentary and does not constitute investment advice. ALINE Wealth and Hightower Advisors, LLC or any of its affiliates make no representations or warranties express or implied as to the accuracy or completeness of the information or for statements or errors or omissions, or results obtained from the use of this information. ALINE Wealth and Hightower Advisors, LLC assume no liability for any action made or taken in reliance on or relating in any way to this information. The information is provided as of the date referenced in the document. Such data and other information are subject to change without notice. This document was created for informational purposes only; the opinions expressed herein are solely those of the author(s) and do not represent those of Hightower Advisors, LLC, or any of its affiliates.