As Q3 2025 unfolds, nonprofits face a shifting economic environment influenced by slow growth, elevated interest rates, trade turbulence, and significant shifts in federal foreign aid. This report reflects on Q2 trends and outlines strategic insights to guide organizational resilience and impact in the months ahead.

We recognize that this kind of economic volatility can feel overwhelming, especially for organizations that rely on consistent donor support, public funding, or long-term planning to serve their missions. You are not alone in navigating these complexities. Nonprofits are still uniquely positioned as stabilizing forces in times of instability. While market uncertainty can trigger understandable concern, it can also create opportunities for strategic realignment, bold planning, and strengthening donor relationships.

At Infinite Giving, we want you to feel not only informed but empowered. This report provides a clear view of market shifts, inflation trends, interest rate expectations, and how donor behavior is evolving. Armed with this data, you can make proactive financial decisions, improve risk management, and build deeper financial resilience.

From revisiting investment strategies and goals with us, to enhancing liquidity or launching endowment campaigns, our insights are designed to help you lead with confidence and clarity in 2025 and beyond.
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Economic Activity

In Q2 2025, GDP expanded modestly, with growth hovering around 0.8%–1%, driven by cautious household spending and reserved corporate investment. Consumer prices moderated into the low-2% range, just above the Fed’s target, thanks to cooling housing and service sectors. 

Meanwhile, employment showed mixed signals: while nonfarm payrolls expanded by approximately 147k in June and the unemployment rate fell to around 4.1%, private-sector ADP data hinted at emerging caution. Wage gains remain moderate, potentially limiting donor generosity from middle-income households.
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Inflation and Interest Rates

Inflation has continued to ease gradually, with core measures now trending just above the Federal Reserve’s 2% target. Much of this moderation stems from declining prices in housing and services, though areas affected by tariffs and labor constraints still show persistent inflation. This uneven cooling has made it difficult for the Fed to fully commit to rate cuts without risking a reacceleration in prices.

The Federal Reserve has maintained its benchmark rate at 5.00%–5.25%, taking a cautious stance amid both global uncertainty and lingering inflation risks. While earlier expectations pointed to potential cuts midyear, most policymakers now suggest any easing will be deferred until there is more consistent data showing price stability and economic softening. The FOMC’s upcoming meeting on July 30 is expected to offer clearer guidance on the timing and pace of any future rate adjustments.
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Current Yields as of Q2 Close

As of July 1, Treasury yields stand at:

• 10‑Year Treasury: ~4.26%, relatively unchanged since the end of June.
• 2‑Year Treasury: ~4.30%, signaling markets are pricing in potential rate cuts later in the year.

The yield curve remains flattened yet positive, suggesting expectations for a downturn in rates following a brief economic slowdown.
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Market Conditions & Risks

Trade policy remained a key risk amid Q2. Tariffs on steel doubled, and additional levies of 20–40% were imposed on certain Vietnamese exports, straining U.S. manufacturing and raising input costs. These developments have heightened uncertainty and pressured profit margins. 

Meanwhile, global aid experienced a major shock: USAID was fully dissolved and absorbed into the State Department, with 83% of its programs canceled and 94% of its staff laid off. The shutdown officially took effect on July 1, 2025, eliminating USAID’s role in civilian foreign aid after more than six decades. 

For nonprofits that depend on international partnerships, the loss of USAID as a primary funding source represents more than just a budget cut, it signals a broader geopolitical shift in how development aid is prioritized. This disruption will not only reduce capacity for global health and humanitarian programs but also reshape philanthropic demand. 

Nonprofits with international missions should move quickly to reassess risk exposure, diversify revenue streams, and communicate transparently with donors about the implications and needs arising from this loss. 
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Q3 2025 Outlook

In the coming quarter, GDP growth is likely to remain subdued at 1.0%–1.5% due to trade friction and cautious consumption. Inflation should ease further, but likely shy of the 2% target until late in 2025. 

If recession fears intensify, the Fed may begin cutting rates gradually toward year-end. Equities are expected to remain volatile, with defensive sectors like utilities and healthcare offering relative stability. Fixed-income securities, particularly municipals and Treasuries, are likely to gain appeal as yields creep lower. 

Donor behavior is anticipated to shift toward tax-efficient vehicles like stock giving and donor-advised funds, and nonprofits reliant on international grants must seek diversified funding paths in light of the USAID shutdown.
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Strategic Recommendations

Nonprofits should continue to focus on the following 5 strategies in 2025:

1. Rebalance portfolios to emphasize defensive equities and secure fixed-income holdings.
2. Maintain liquidity reserves to manage both economic volatility and funding disruptions.
3. Engage donors proactively, highlighting impactful, available giving options.
4. Monitor rate and yield trends, adjusting borrowing and reinvestment accordingly.
5. Diversify funding sources, particularly replacing USAID and other international grants with private and multilateral partnerships.

‍Now is not the time to retreat. It's the time to plan wisely, communicate transparently, and lean into what makes your mission essential. We are here to partner with you every step of the way.

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