As we enter Q4 2025, nonprofit leaders are navigating slower growth, shifting trade dynamics, and an important turn in U.S. monetary policy. This edition reviews Q3 developments and provides a forward view for Q4, focusing on what the latest data, and the Federal Reserve’s recent decisions mean for mission‑driven organizations.

We know this environment can feel heavy: operating costs are still elevated, donor sentiment is uneven, and policy is in flux. You are not alone. Nonprofits have always been shock absorbers for their communities. When the macro picture is noisy, the disciplines of liquidity planning, diversified portfolios, and clear donor communication become powerful stabilizers.

Our aim is to turn complexity into clarity. Below you’ll find a concise read on growth, inflation, interest rates, yields, and market risks, along with concrete implications for reserves, endowments, and gift readiness. Use this to align leadership and boards, sharpen scenario plans, and communicate with donors about the real needs (and opportunities) in front of you.

As always, if anything has changed in your liquidity needs, time horizon, or financial goals, please reach out to schedule time with your Advisor or reach out to us at anytime.

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Economic Activity

Economic growth cooled further through Q3. Consumer spending lost momentum, capital investment stayed cautious, and tariff‑related costs continued to filter through supply chains. Headline inflation eased, but core measures remain a touch above target, largely in services. 

Labor data also showed slower job creation and softer openings - enough to nudge the Fed toward easing, but not enough to declare victory on inflation. For nonprofits, this mix usually implies steadier demand for services, uneven individual giving, and continued prudence from corporate sponsors.

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Inflation and Interest Rates

In September, the Federal Reserve began an easing cycle, cutting the federal funds target by 25 bps to 4.00% - 4.25%. Policymakers also indicated that additional cuts later in 2025 are likely if inflation continues to cool and growth stays soft. The message: the Fed is balancing risks and acknowledging slower momentum while guarding against a rekindling of inflation.

What this means for nonprofits: borrowing costs should begin to edge lower into year‑end, though the transmission to bank lending is gradual. Investment income on cash‑like instruments will drift down from peak levels. This is a good window to reassess your tiered policy: confirm short‑term liquidity needs (6–12 months), evaluate whether to extend duration modestly in the intermediate sleeve, and ensure long‑term funds remain aligned with policy targets and volatility tolerance.

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Current Yields and the Curve (Q4 kick‑off snapshot)

As of this writing, the 10‑year Treasury is currently hovering a little above 4.1% and the 2‑year Treasury around the mid‑3.5% area, with the curve flattening and beginning to re‑steepen as markets price additional Fed easing. Practically, this means short yields are falling faster than long yields. Expect modest downward pressure on money‑market and T‑bill rates first, with core bond benchmarks stabilizing.

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Market Conditions & Risks

Tariff volatility moderated in Q3, but the 2025 actions continue to lift input costs and complicate pricing across manufacturing, tech hardware, and selected consumer goods. Term premia in longer‑dated Treasuries remain sensitive to fiscal supply and inflation uncertainty, limiting how far long yields can fall even as the Fed eases. Internationally, the USAID dissolution and absorption of functions into the State Department have fully taken effect, reshaping funding channels for global health and humanitarian programs. Nonprofits with cross‑border missions should continue diversifying grant sources and strengthening private‑philanthropy pipelines.

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Q4 2025 Outlook

Base‑case growth stays below trend into year‑end. Inflation should drift down but may remain just above the Fed’s 2% goal. With at least one more 25 bps cut plausible in Q4 (data‑dependent), expect lower front‑end yields, a gradually steeper curve, and choppy but range‑bound risk assets. Equities are likely to trade on earnings resilience versus margin pressure from tariffs and wage costs; defensive and cash‑generative businesses remain favored.

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Implications for Nonprofit Portfolios & Reserves

Cash & Short‑Term (0–12 months)
‍Begin planning for lower yields on operating cash and money market funds. Maintain the liquidity buffer set in policy (often 6–12 months of expenses), but consider a ladder of T‑bills/short notes that captures still‑elevated front‑end rates while they persist.

Intermediate Reserves (12–36 months): A gentle easing path supports core bond and high‑quality municipal allocations. Consider modest duration extension (e.g., from ultra‑short to short/intermediate) to lock in yields before they fall further, while avoiding aggressive interest‑rate bets. Laddering and barbell approaches (mix of short and intermediate) can balance reinvestment risk.

Long‑Term / Endowment (36+ months): Maintain strategic equity targets; emphasize quality, free cash flow, and balance‑sheet strength. Within fixed income, maintain investment‑grade exposure and evaluate TIPS as an inflation hedge if policy cuts are slower than expected. Alternatives used in accordance with policy can diversify return drivers, but liquidity discipline remains critical.

Gift Readiness: With markets stabilizing and rates easing, remind major donors about tax‑efficient non‑cash gifts (appreciated stock/DAF grants). Ensure brokerage, DAF registrations, and gift acceptance policies are current so you can receive these gifts quickly.
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Strategic Recommendations for Nonprofit Financial Leaders
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1. Reaffirm the tiered policy. Match cash to near‑term needs; position reserves to earn while preserving; keep endowment long‑term.
2. Extend duration selectively. Add 0.5–1.0 years to the reserve sleeve where appropriate to reduce reinvestment risk as cuts proceed.
3. Favor quality in fixed income. Stick to investment‑grade, with municipals for appropriate investors; be deliberate with credit risk.
4. Scenario plan for tariffs. If applicable, stress‑test margins and program costs under higher import prices; reflect these realities in budgets and funding asks.
5. Communicate with donors. Tie macro shifts to mission needs; highlight stock and DAF gifts and endowment building as resilience tools.

We can help you with all of these. Infinite Giving remains committed to guiding nonprofits through these complex times, helping them adapt strategies, optimize resources, and continue delivering transformative impact.

Sources

• Federal Reserve (Sept. 17, 2025): FOMC statement, implementation note, and Summary of Economic Projections – dot plot.
• U.S. Treasury: Daily Treasury Par Yield Curve Rates.
• St. Louis Fed FRED: 10-Year Constant Maturity Series.
• Reuters polls & market wraps (Sept.–Oct. 2025): Yield-curve steepening expectations and Fed commentary.
• Yale Budget Lab (Aug.–Sept. 2025): Short-run effects of 2025 tariffs.
• Conference Board: U.S. Forecast and tariff impacts.
• Reuters / AP on USAID: Reuters coverage and AP/ABC reports.

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