Currently, the stock market is in between a correction and a full-blown bear market. The S&P 500
Monday's lows were extraordinary in terms of selling pressure with nearly every stock moving lower on high volume. It hit extreme technical levels in terms of the number of stocks that are down more than 25% in less than a month, and the number of stocks trading below their short and medium-term moving averages. The volatility index, VIX
In bull markets, these types of selling events are often climaxes from which stocks furiously rally higher like December 2018. The S&P 500 did put in a healthy 5% bounce on Tuesday especially as the government proposed a series of fiscal measures to boost the economy, however much of these gains were given back by Wednesday's open.
Bear Market Conditions
One reason for the lack of follow-through buying is that the fundamentals of the situation are not improving, and the market is still fully pricing in the amount of economic damage. Further, the public and policymakers don't seem to be grasping the effects of the measures necessary to stop the spread of the virus, the amount of stimulus, and how to effectively target it to make up for the economic damage. Additionally, delay in taking action only compounds the damage and the necessary size of the remedy.
The situation has also created several tail risks that are difficult to quantify. There's going to be serious damage in industries like cruises, airlines, hotels, and restaurants. The oil crash has also created a number of risky areas in energy, companies that lend to them, investors holding these instruments, and knock-on effects in certain regions and industries.
Potentially, the scariest threat is that this situation has highlighted the shortcomings and fragility of our healthcare system which isn't equipped to handle a full-scale outbreak like what Italy is experiencing. The 2008 crisis in the banks was scary and caused a lot of pain and damage but many of the worst effects were mitigated by printing and spending tons of money that prevented many second and third-order effects. Same with the auto bailouts and many of the issues facing us today, however an overloaded healthcare system can't be fixed with money especially in the short-term.