A Market "Retrenchment" Ahead Looks Likely | Jonathan Wellum

Rising rates threaten overleveraged economies

Higher interest rates filtering through the economy will have strong negative effects given current systemic debt levels and global indebtedness.

Energy costs driving inflationary pressure

Increasing energy expenses are expected to fuel further inflation while simultaneously slowing economic growth across developed markets.

Fragile global growth backdrop

Economic expansion outside the U.S. is already minimal in Europe and Canada, leaving little buffer against external shocks.

Middle East infrastructure damage is severe

The war involving Iran has damaged oil and gas facilities, including Qatar's LNG plant, with repairs potentially taking years rather than months.

Critical supply chokepoints at risk

Approximately 20% of global oil passes through the Strait of Hormuz, alongside vital fertilizer and natural gas shipments.

Oil shock historical precedents are troubling

Oil price spikes occurring when economies are already compromised historically produce severe negative economic outcomes.

Adhere to investment thesis during volatility

Investors should revisit original reasons for owning securities and avoid emotional decisions during potential 30-40% drawdowns.

Establish clear sell disciplines upfront

Define exit criteria before purchasing; sell when thesis changes, valuations become excessive, or better opportunities emerge.

Maintain strategic asset allocation

Keep non-volatile assets for short-term liquidity while taking profits in sectors that have appreciated rapidly, such as precious metals.

Private real estate facing liquidity crisis

In Canada, 40% of $80 billion raised in private real estate funds is currently gated, with similar pressures emerging in U.S. private credit.

Distribution cuts trigger redemption cycles

Many gated funds have cut distributions, prompting investor exits and likely leading to significant future writedowns.