Investing.com -- Wolfe Research is cautioning that U.S. equities may have further to fall, arguing that investor fear has yet to reach the levels typically associated with durable market bottoms.

In a note Thursday, Wolfe Research analyst Chris Senyek said that in past episodes of extreme stress, including Liberation Day, the SVB crisis and the onset of COVID, the VIX has “typically spiked above 40, signaling peak investor fear and marking a bottom in stocks.”

But during the current selloff, the index only touched roughly 35 on an intraday basis on Monday. Wolfe’s “sense is that max fear has not yet been reached.”

The firm added that several volatility and positioning gauges it tracks, including the put/call ratio and hedge fund crowding metrics, “have yet to signal that investors have fully capitulated.”

Seasonal patterns also point to more turbulence ahead. Wolfe noted that March usually marks a local peak in the VIX before it eases through spring and summer.

This time, however, the backdrop is said to be more fragile. “Elevated volatility from the conflict in Iran and growing worries over cracks emerging in private credit give us reason to believe that the near-term path for stocks remains to the downside.”

The analysts said they “would not be dialing up risk exposures” and expect equities to “continue to bleed lower” until either the VIX breaks above 40 or news flow points to a meaningful de-escalation in the Middle East.