• Next, as we have shared in the past, volume surges over the past year have often been associated with shorter-term lows. Over the past few days, we have witnessed record levels of NYSE Composite trading (see Figure 6).

Figure 6: Volume Surges Have Been Associated with Prior Short-Term Lows

Source: Thomson One, SunTrust Robinson Humphrey

• Also, as illustrated in the bottom panel of Figure 7, the percentage of stocks in the S&P 500 above their 50-day moving average has been declining, but not yet at the sub-20% level generally considered oversold.

Figure 7: Percentage of Stocks above 50-Day Moving Toward Oversold, but Not Quite There

Sources: Stockcharts.com

• All in all, the sentiment indicators reviewed appear to be moving in the right direction, but it remains premature to say any type of sustainable bottom is set. Moreover, after the extreme selling pressure of late, it will be important to see some strong buying pressure on any rally, much like we saw initially off the March lows.

IV. Bottom Line

Equity markets are facing unprecedented challenges, and the current period is filled with vast uncertainties, which continues to pose near-term downside risk. Each investor has a different set of circumstances, risk tolerance and timeframe. Often, when asset allocations are set in bull markets, it's easy for an investor to overestimate their tolerance for risk. If on a personal level, the current market stress test is proving too much, then it may be prudent to reduce one's equity exposure. Obviously, an individual that has a two-year investment horizon is not afforded the same time benefit to ride out a downturn that a person who has a five- or ten-year outlook. While we don't pretend to have all the answers, we continue to believe equities are one of the best ways for investors to generate wealth over the long-term. We would also caution clients not to let panic/emotion dictate a well thought out investment plan, as studies have shown it is very difficult to time when to get in and out of the market (which also requires an investor to make at least two great calls), and extreme levels of pessimism are typically prevalent at market lows.

1 | 2 | 3 | 4 |