In our prior home we had some huge pecan trees in our yard. Pecans are beautiful trees during the summer, but when they drop their leaves in the fall they look like they have died. Throughout the winter they make the yard appear quite gloomy.
One day as I wandered about the pile of leaves beneath the eerie branches I thought about the wisdom of pecan trees. These majestic giants spend the summer putting out massive branches covered with leaves and producing buckets of pecans. As the weather cools they instinctively know that winter is at hand. Knowing that shorter, colder days means little food, less water and minimal sunshine, the trees enter preservation mode. They voluntarily shed the beauty of their leaves to reduce their needs during the winter. Attempting to maintain a beautiful canopy during the scarcity of winter would be death to the pecan tree.
While marveling at the wisdom of the trees I noticed that though they appeared dead, up close I saw their branches were covered with thousands of tiny new buds. In a miracle of nature my trees, while preparing to weather a cold winter, had already set buds for the spring. They instinctively knew that winters don’t last forever and wanted to be prepared for better weather that would certainly one day arrive. If the trees waited until spring to set buds, it would be too late. In a marvelous way pecan trees were cutting back in the present, while investing in the future.
National economies go through a continual cycle of changing seasons. When things are gloomy, as was the case during Covid, people tighten their belts, simplify their lives and reduce their needs to weather the storm. When economic matters start to brighten up, it’s only natural that people start returning to a more normal life of spending, building and travelling.
As I have observed this behavior I have also noticed that many miss a critical step in the process. When the days are gloomy, like the trees, we need to set buds for the coming spring. From an investing point of view that means recognizing an economic spring will bring new opportunities. The best time for investors to set those buds is while the days are still dark.
Let me give a simple example. In the past year rising interest rates have made investing in guaranteed fixed income very tempting, and I have encouraged it. But with an election year around the corner, and lower interest rates already on the horizon, new opportunities will arise. Now, while it still feels gloomy, may be a good time to take some of those investable funds and set new buds for the spring. Most investors wait until economic sunshine arrives to make changes, but that is because most investors don’t know what trees have always known. The time to invest for the next spring cycle is when winter is still upon us. We can certainly learn a lot from trees.
Dan Wyson, CFP® is a long running national financial columnist, author of several books and CEO/Founder of Wyson Financial/Wealth Management 375 E. Riverside Dr. St. George, UT 84790 – 435-986-9525 Securities and Advisory services offered through Commonwealth Financial Network®, member FINRA/SIPC, a registered investment advisor.