(Kitco News) - The increasing stress in private credit markets is pointing to a broader tightening in financial system liquidity, even as public equities continue to trade near record highs, according to Bert Dohmen, president and founder of Dohmen Capital.
Speaking with Kitco News on April 27, 2026, Dohmen said the divergence reflects a late-cycle transition in which institutional investors are reducing exposure while risk is increasingly absorbed by retail participants.
The pressure is most visible in private credit, where rising redemption requests are colliding with assets that cannot be easily sold. That mismatch, he said, reflects a wider shift in liquidity conditions across markets.
“The private credit is going to be the leader into the abyss,” Dohmen said.
Liquidity tightening driving credit stress
Dohmen said the key driver of major market turning points is not earnings growth but the direction of liquidity and credit.
“The only thing you want to look at is whether the liquidity is increasing or decreasing and whether the credit is increasing or decreasing,” he said.
He argued that earnings can remain strong near market peaks, masking underlying deterioration in financial conditions. “Earnings are irrelevant at the turning point,” he said.
That same tightening in liquidity, he said, is now surfacing in private credit markets, where leverage and illiquidity are reinforcing each other as investors attempt to exit positions.
“You can't even get your money out,” he said.
Distribution and valuation reflect late-cycle conditions
Dohmen said markets have been in a distribution phase since June 2025, with large investors gradually reducing positions while maintaining a constructive narrative, noting that “they sell to the public.”
In turn, that process shifts risk to less-informed participants while liquidity conditions continue to weaken beneath the surface.
Dohmen said the risk is compounded by elevated valuations and increased speculation.
“Stocks have now the highest overvaluation in history,” he said, adding that markets are “more overvalued than 1929.”
He also pointed to the scale of leverage in the system, describing current conditions as “five times or 10 times” prior cycles, and compared the structure of credit markets to the period preceding the 2008 financial crisis.
“They're doing the same thing that they did in 2008,” he stated.
Forced selling dynamic may pressure metals
As liquidity tightens, Dohmen said investors are likely to sell liquid assets first to raise cash. “They sell what they can.”
That dynamic, he said, can pressure even traditionally defensive assets such as gold and silver in the short term before conditions stabilize.
Policy response likely to follow
Dohmen said a broader market downturn would likely prompt a “bailout” from central banks through liquidity injections.
He argued that such measures may stabilize markets but would come at the cost of purchasing power over time.
“Artificial money creation means reduced purchasing power,” he said.
Positioning becomes critical as cycle shifts
Dohmen said investor outcomes will depend on how portfolios are positioned as liquidity conditions deteriorate, particularly exposure to illiquid assets and highly valued sectors.
He emphasized the importance of maintaining a longer-term perspective during periods of volatility.
“The big money is made by sitting, not by trading,” he said.