What does the market downturn mean for Overflow?

6 Minute Read
Posted by Overflow Team on June 9, 2022

There's been a lot of buzz in the media about the stock market "crashing," with many fearing that it's 2008 all over again. And while it's fair that by comparison the stock market has limped to a slow start this year, the word crash is a bit hyperbolic.

First off, it's not 1929 or the Great Depression, and there are way more protections in place (such as the FDIC) to ensure that banks don't fail and personal finances and investments are protected.

Secondly, the economy as a whole has been rattled by rising inflation and a recovering, post-pandemic supply chain. It's not going to stay that way, and the historical trajectory of the stock market (despite some down years) has consistently been up and to the right.

Are there some frustrating statistics? Absolutely. The Dow Jones is down 9% this year, the S&P 500 index is down 13%, and the personal savings rate is the lowest it's been in 15 years (4.4%).

Still, it's important to remember the cyclical nature of the stock market, and that people aren't going to abandon the stock market altogether simply because the economy is in a rut right now. Same goes for cryptocurrencies like Bitcoin.

The stock market's recent downturn may raise questions around how stock giving (and in turn, a company like Overflow) will fare in this market. While we're obviously keeping tabs on what's going on, we aren't hitting the panic button. We remain committed to the fact that stock and crypto giving is still one of the most potent ways to give despite what the market is currently doing. Here's why…

Context Matters

Most savvy investors are actually licking their chops at the market's potential right now, and many see it as a sale! Stock market 101 says buy low and sell high. Imagine walking into a store and seeing a bunch of items marked down. You wouldn't wait for the sale to be over to buy them – you'd get them while the sale was still running.

It's a similar premise here. Obviously everyone has their own investment strategy, and risk tolerance varies from person to person. However, we have to look at the big picture when it comes to investing in stocks. As notable investor Peter Lynch once said, "in the stock market, the most important organ is the stomach. It's not the brain."

Let's look at the S&P 500, for instance, which tracks 500 major companies on the stock market exchange. At the beginning of the pandemic, the S&P plummeted 20% as panic and uncertainty set in. However, it still finished the year up 16.26%.

And since its inception, the S&P 500 is up ​​3,640.27% all time despite enduring years like 2008, where it was down almost 39%.

As of June 2022, the S&P 500 is in relatively the same spot it was in April 2021, a month people considered generally good for the stock market.

The same premise applies to cryptocurrencies, such as Bitcoin (BTC). BTC was worth $327 per coin in 2015, and is currently worth $31,000 per coin as of June 7, 2022. Yes, it's down 34% as of this year, but we can't look at that data in isolation. Holders of Bitcoin aren't buying it when it's super expensive, nor are they freaking out and selling everything because of the current dip.

"There's a new [crypto] floor," said Overflow CEO Vance Roush. "And millennials and Gen Z know this. Bitcoin is not going away. Some of the biggest banks, Tesla and Square (Block) have all underwritten these currencies. I'm not talking about meme coins or altcoins and things like that. I'm just talking about the crypto space. Bitcoin is one of the indicators that it's here to stay."

Giving is Resilient

Another common misconception is that people will give less when they're cash-strapped or the economy isn't doing well. During the height of the pandemic, charitable giving totaled $471.44 billion, up from $448.66 billion in 2019.

It seems counterintuitive that people gave less in a "prosperous" year than a disaster filled one, but the opposite was the case. When under trial, people come together and give more.

You can apply the same premise to the current situation. A recession might be looming, the stock market is down, and there's uncertainty with the conflict in Ukraine. People would have good reason to just store up their money for the long haul and not give.

But generosity remains a constant regardless of circumstances. People who regularly practice generosity aren't going to abandon their commitment altogether just because some of their stock or crypto holdings might be down.

And fortunately, Overflow isn't tied to a single source of giving. The company was founded knowing fully well that the nature of stocks and crypto isn't static. They're always shifting, but the potential that they unlock is still better than not using stock, crypto, or other non-cash assets in the first place.

Overflow Gives Options

Regardless of stock market circumstances, Overflow offers flexibility and a wide array of options for donors to consider. Most people hold their wealth in non-cash assets and have diversified portfolios that aren't attached to a single source.

Donors can look at their stock, crypto, and cash portfolios and consider which avenue might be the wisest to give from in the current moment. Perhaps it's a mixture of the three to add some diversification and protection.

"If you only have one option, then you're always going to be limited. But if you have multiple options, you're actually providing the maximum opportunity for somebody to be able to continue to support you," Roush said. "When you increase the amount of options for your supporter base, it actually optimizes the opportunity because it allows them to survey where they might be able to give from."

Beyond just offering flexibility and a diverse stream of assets to pull from, Overflow also offers the lowest cash processing fees in the market, thus saving even more money. The net savings from these fees unlocks more generosity so that donations can go directly to the mission or cause, not get tied up in nickel-and-diming.

Put Yourself in Position to Succeed

The nature of the stock market is uncertainty, and if someone could predict it with 100% accuracy, they'd be the richest person in the world. However, there's always going to be some level of risk involved with investing.

Rather than seeing this as a "sky is falling" moment to hunker down, consider it as a window of opportunity.

As we discussed, people often invest more and give more when circumstances are tough. So when things inevitably do return to "normalcy," you've already built those investing and giving muscles. Plus, you can use the money invested now for future contributions.

"Let's say towards the end of the year, the markets start going back up – people [will] want to give stock more than ever because they bought low," Roush said.

As a nonprofit or church considering if it's worth it to incorporate Overflow's services during a "down" market, consider this:

The market will rebound, so why not take the time to build out the infrastructure for stock or giving in the meantime? Start messaging around the benefits and value of stock and crypto giving now, so that when there is a market bounce back, you're in prime position to hone that appreciated wealth and inherent desire to give.

"If you're already built the infrastructure and communications internally, and [your donor base] knew [stock or crypto] was an option, then when they're ready, it's, it's set up and ready to go. The people that are going to do well are the ones that are positioned," Roush said.