The top publicly traded software companies have surged in the last few weeks.

MongoDB (MDB), Snowflake (SNOW), DataDog (DDOG), Cloudflare (NET), & ServiceNow (NOW) have watched their forward multiples surge by 42% to 112% since the beginning of the year. The bond market has priced in a roughly 1% to 1.25% cut in the next 24 months. When interest rates fall, high-growth software surges.

Two peculiar elements characterize this market surge:

1. Most of these companies have reported weak earnings & projected weak outlooks for the next quarter. Google, Microsoft, & Cloudflare have lamented longer sales cycles, greater customer focus on costs, & a lack of any change in that sentiment for the next quarter.

2. Only the top 5 or so stocks by growth rate have won expanded multiples from the market. The rest of the top quartile has remained depressed, suppressing the cohort to 2017 levels, just as they were last year. These top five stocks explain the most recent earnings upward in the chart above. But rally hasn’t convincingly beaten the black line representing the 2017 median.

Without a material change in the overall multiples of the public market, I don’t expect to see a pricing change in the private market - even if the fastest-growing companies fly higher due to a tailwind from shifting monetary policy.

Both the public & private capital markets await signs of buyer strength in the form of greater expansion rates & faster sales cycles.