By Trey Richardson
The reality of the stock market is that it’s a voting machine in the short term, assessing the popularity of a company. More importantly, it is a weighing machine in the long term – assessing substance and enduring value. The same can be said of your political action committee.
Regardless of the short-term economic challenges of COVID-19 and depressed oil prices, it’s encouraging to realize that the time period between stock market lows is traditionally irregular, with over a decade passing between most of them. Contractions in the stock market tend to coincide with economic recessions, but interestingly do not coincide with other major crises. Looking back, the Cuban Missile Crisis, Kennedy assassination and September 11 did not induce major stock market crashes beyond the first few days. Yet, the stock market correction of 1987 due to a weak dollar and mishandling of U.S. trade agreements caused a 34% loss for the market; in 2000 the dotcom collapse induced a 49% loss; and the 2009 financial and housing recession posted a 57% loss.
Juxtapose these statistics against those of political action committee fundraising over the same 22 years and we find that only 1987’s Black Monday and the 2009 crisis directly impinged PAC funding. During those election cycles, PAC fundraising was down 34% and 20% respectively. PAC fundraising also fell off in the 2006 elections due to a reduction in consumer spending and weak corporate earnings reports in 2005 causing many to cut budgets for government affairs programs.
The lesson here is that recessions affect political finance, but crises do not.
COVID-19, combined with oil pricing pressures from Saudi Arabia and Russia, have had a significant impact on the stock market; reducing the Dow Jones Industrial Average some 33% in the first three months of the year. Encouragingly, although counterintuitively, this market decline is far less than the impact the 2009 recession had on stocks. Jim Stack, founder of InvesTech Research, said Friday that there “are no solid warning flags of a recession” looming. Moreover, with the stock market having grown some 22% over the last year, a net loss of 11% should be easily made back by year’s end once COVID-19 is under control and we all go back to the office, retail stores and restaurants. Additionally, we should see oil prices improve as we enter the summer months.
This is all good news for PAC and other fundraising professionals.
Assuming we don’t “hit the trifecta” with another incident negatively impacting the marketplace, I am estimating the dawn for PAC fundraising will arrive just before the June primaries. It is interesting when researching PAC and stock market trends that after a major market correction, PAC fundraising rebounds an amazing 61%. Following a crisis like September 11, PACs increased receipts some 13%.
Like stocks, the PAC market rewards organizations that create long-term value. What matters is a PAC’s underlying infrastructure and actual performance, not fickle opinions about its prospects in the short term given some deviation in the market. Even though the economic slowdown is currently haunting our thoughts and actions, it’s important to provide goodwill and education to your donors and prospects now. In return, your actions will find their way back in the form of contributions, participation and appreciation. To be successful, take action to create enduring value for your organization today.
Trey Richardson is managing partner at Sagac Public Affairs, a national firm that provides communications, market research, fundraising and issue advocacy solutions to hundreds of political, nonprofit and corporate organizations. Sagac is an industry leader in the implementation of comprehensive strategies for political finance operations.