Admittedly, current economic conditions are poor. Economic output has cratered,But this does not necessarily mean equity prices should be substantially lower than they are now. The US equity market is not about whether economic conditions are good or bad. Rather, what matters is whether conditions are improving or getting worse.
Consider the period following the 2009 recession. It took many years for the level of economic activity to return to potential, as the chart below demonstrates. Even as potential growth repeatedly got revised down, the level of growth hit potential sometime in 2017. Still, this period was an especially good one for stock prices even if for many, it "didn't feel like" a recovery.
Notice that the timing of this improvement precedes the formal lifting of shelter-in-place orders for nearly all states. Thus, it stands to reason that there is room for at least some improvement once formal lockdowns end. For example, in 1982, the economy saw a deep recession after a brief recovery because the Federal Reserve tightened interest rates to take on inflation. In the case of the coronavirus pandemic, the policy choice would be to shut parts of the economy down if the virus spread gets worse.
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