President's Message
Brenda Heisch, Vice President, Quad City Bank & Trust, and President of the Iowa Trust Association
 
Welcome everyone to 2023!

As I begin this year as president of the Iowa Trust Association, I would like to thank the many people that make this organization successful.

Thank you to our past president, Nathaniel Tagtow, who led with competence and professionalism. Thank you to Iowa Bankers Association for their assistance over the years and for allowing us to work with Darcy Burnett. As many of you know, she is often behind the scenes and helps ITA run seamlessly and without her……. well, I don’t what to think about it. Thank you, Darcy. To all current and past board members- thank you. Your insight and guidance have been invaluable navigating the ever-changing trust industry throughout time.

And finally, thank you to all members of the ITA. The collaboration amongst us is what makes this entity great. I believe we all have a mutual interest in making our customers lives better- assisting them with their financial world- whatever that may be.
As we enter into tax season, keep pushing forward and the work will get done! In fact, before you know it, we will be looking at 2023 in the rearview mirror. Wishing you all a prosperous year!
Finding Opportunities in 2023 after a (un)forgettable market year?
Most investors are probably happy to see 2022 in the rearview mirror. Looking ahead to 2023, inflation and the possibility of recession remain the global market’s focal point. Our base case is inflation will further recede as supply chain pressures ease and central banks will remain committed to tighter policy. However, the result of this policy is likely to be a slowing of the economy. This could create opportunities for investors:
  • Europe is likely already in a recession and the United States is likely to fall into one—hopefully a mild one. Risk/reward profiles seem to favor fixed income over global equities, particularly for the first half of 2023. Any recession and subsequent recovery may well be rapid and create market volatility. We believe it will be as important as ever to be diversi­fied and actively select investments, particularly when tilting toward risk assets.
  • As we discussed in our most recent Macro Perspectives,1 expensive equity prices and the potential for a peak in interest rates have been driving a preference toward fixed income. We expect investors to search for quality and perhaps increase duration in 2023, with some ideas to consider: Extending duration may provide compelling income opportunities, and US Treasuries could be the core for building duration.
  • Investment-grade (IG) corporates look like an attractive place to us for investors seeking relatively safe income.
  • High-yield (HY) credit looks attractive for investors with a multi-year time horizon, in our view, as current yields and active selection provide a cushion for potentially near-term higher defaults in the sector.
  • The key takeaway: “Don’t fight the Fed.” Bonds will likely rally as the US Federal Reserve (Fed) achieves its goals, whether the US economy’s landing is soft or hard. Equities are less likely to perform as well—unless the landing is soft. Otherwise, falling profits will offset falling bond yields and equities are unlikely to advance. That outcome is also a recipe for elevated equity volatility.
  • Some investments can act as a hedge against inflation and potential downgrades in earn­ings. The impact of inflation on listed infrastructure in 2023 should be muted, particularly for regulated assets, which often have inflation adjustment clauses. Infrastructure earnings look better protected in general than global equity earnings, in our view.
  • Historically, US commercial real estate investment has performed favorably in periods of rising interest rates and inflation. Current macro risks and market dislocations may create attractive buying opportunities over the next 12–18 months in some sectors of commercial real estate.
For more detailed insights and outlooks, see the full Global Investment Outlook.
Employing the Right Farmland Broker

For many, making the decision to sell a farmland holding can be extremely difficult, particularly if the property has been owned by a family for multiple generations and the owner has only one chance to get it right. For others, buying and selling farmland is an everyday occurrence. Regardless of where you fall on this spectrum, the fact remains that selecting the best agricultural real estate broker is critically important for farmland sellers, buyers, investors, and others. Here are some factors to keep in mind when selecting your broker.

FOR SELLERS
Dedicated Farmland Broker vs. Generalist Broker
It is easy for commercial, residential, or generalist brokers to think, “it’s just dirt, how hard can it be?” before attempting to take on agricultural listings. Brokers who are spread thin across multiple property types and are not dedicated solely to farmland typically lack the depth of knowledge necessary to understand an ag property’s nuances and complexities, which are subsequently not well represented to the market. This can lead to inaccurate asset pricing, poor buyer interest, marketing materials that misrepresent the property and increases seller liability, extended marketing times that stigmatize properties or no-sales, and unmet client expectations, to name a few.

Maximizing Exposure and Proceeds 
In order for a broker to maximize a seller’s proceeds, they have to understand what category of buyer or combination of categories – investors, local farmers, regional ag players, national operations, etc. – is most likely to purchase an asset. The broker must be able to implement the correct sale strategy (auction, widely exposed traditional listing, confidential offering to select qualified buyers, etc.) and maximize exposure to as many target buyer as possible, creating the most competitive sale environment in order to generate the highest sale price. When considering brokers, sellers should assess whether a potential broker will actually undertake efforts to maximize buyer exposure or if they are more likely to simply take a listing to a small handful of trusted buyers and friends with no subsequent additional effort.

FOR BUYERS
For buyers considering whether to use an agricultural real estate broker to represent them in a purchase, it is important to understand that commissions are traditionally paid by the seller, so there is typically no additional cost to a buyer who employs a buy-side broker. If a buyer is not a seasoned transactor of real estate or farmland, there is often a great benefit in being represented by an experienced brokerage professional with deep knowledge of agriculture who can assist with negotiations, due diligence, and advising the buyer in order for his or her best interests to be advocated in the transaction.

CONCLUSION
Experienced, dedicated farmland brokers can add an immense amount of value to an agricultural property transaction; therefore, buyers and sellers must take care to select the right broker.
Contribute to the Iowa Trust Association
As a reminder, the Iowa Trust Association welcomes contributors to its quarterly newsletter. If you would like to comment on recent activities in the industry or let us know about an upcoming event that would be of interest to our readers, please feel free to contact Darcy Burnett, at 800-987-7365. Thank you for your interest in our publication and we look forward to hearing from you.

If this message was forwarded to you and you would like to receive the ITA Newsletter, please email Darcy Burnett to subscribe.
Published by Iowa Trust Association.