In the second half of 2016, as markets began to realise that the bottom for bond yields had likely been hit, a seismic shift started to occur in equity markets. In recent years, quality and growth had been the focus of larger fund managers. “A weight of money came in and so long as these companies were delivering earnings upgrades, they didn't really focus on valuation,” explains Jeremy Bendeich, Chief Investment Officer of Avoca Investment Management. As the reality of rising rates sunk in, attention began to turn from high-priced growth stocks to relatively cheap cyclicals. As the ‘weight of money’ left the small and mid-cap space, it dragged down stocks both with and without downgrades. In this video and edited transcript, he explains why tightening credit conditions pose a downgrade risk for some companies.