Analysis
I don't think BofA's Bull & Bear Indicator hitting 9.7 this week — its highest reading since 2021, and comfortably above the firm's own 8.0 sell-signal threshold — is the kind of thing you sell into. Pulse covered the reading itself Friday: equity fund flows, tight credit spreads and broad market breadth all pushed the gauge past where BofA's own playbook says get defensive. But I think the more useful question for anyone marking a venture portfolio isn't whether to trim public exposure — it's what an indicator this extreme should change about how you underwrite the multiples you're using to mark private companies against their public comps.
Here's my read: an indicator sitting at 9.7 doesn't mean a correction is imminent — BofA's own history shows readings above 8.0 have sat there for weeks before anything happens, and sometimes nothing happens at all. What it does mean is that the market has very little room left to absorb a disappointing print without a sharp multiple reaction. That matters directly for GPs marking portfolio companies against public SaaS, AI-infrastructure or fintech comps right now, because those comps are trading at multiples set during exactly this kind of extreme-sentiment window — Cloudflare's stock is up 44% year to date, SpaceX has swung double digits in single sessions twice in one week, and the AI-infrastructure names carrying this market are the same ones with the least room to disappoint.
“What it does mean is that the market has very little room left to absorb a disappointing print without a sharp multiple reaction.”
If you're finalizing a 409A or a markup this quarter, I'd run the sensitivity the other direction: what does this company's implied multiple look like if its public comp set compresses 15-20%, not what it looks like today. That's not a prediction the correction happens on any particular timeline — it's just matching your risk assumption to what the sentiment data is actually telling you, which is that today's multiples have very little margin for error built in.
Room for disagreement: BofA's indicator has thrown false-alarm sell signals before, and reading a hard correction into one number ignores that the S&P and Nasdaq both rallied the same week the gauge hit its high — real earnings strength, with Cloudflare's beat-and-raise and Alphabet and Microsoft both guiding capex higher rather than lower according to the Motley Fool, is arguably a better predictor of near-term direction than a positioning gauge that's mechanically driven by fund flows and credit spreads rather than fundamentals. A GP who marks down every portfolio company every time a sentiment indicator gets stretched will systematically under-mark good companies during exactly the periods when they're compounding fastest.
Either way, the number I'm actually watching next isn't the indicator itself — it's whether the next round of mega-cap earnings gives the market a reason to test that 8.0 threshold for real, or gives it one more quarter of cover to stay stretched.
