The market won't bottom until professional fund managers begin underweighting stocks, Voya Investment Management's Karyn Cavanaugh said Wednesday.
But there's a problem. Investors are not yet taking a dim enough view of equities because, despite fundamental weakness in corporate earnings, stocks still look cheap compared with bonds in the current low-rate environment, she said.
The S&P 500 had surged 6 percent since Feb. 11, when JPMorgan Chase CEO Jamie Dimon announced he had purchased 500,000 shares of his bank's stock. But the rally since the so-called Dimon Bottom was foiled this week as stocks fell back into correction territory.
Equities fell in tandem with oil futures, which reversed gains on Tuesday after Saudi oil minister Ali al-Naimi dashed investors' hopes that major producers would eventually cut output to stabilize prices.
To be sure, managers are raising more cash, Cavanaugh said, but capitulation selling has only just begun.
"We're talking about episodic volatility. We think this is going to continue, and until we get that full-fledged capitulation, there is a little bit more risk, we think, to the downside," she told CNBC's "Squawk Box."