But it's not crazy to expect the markets to rebound. People are becoming unemployed for a _transient_ reason of lockdown etc., economic recession is due to the pause button being pressed, and not a fundamental breakdown in economic activity.
Of course prolonged lockdown etc. could make things worse still. But the main pain we see is definitely expected to me short-medium term.
As for markets being irrational - actually, I think they are more often rational than not. They are mostly bashed for being irrational in hindsight, which, well, is not really fair. Also, it is just often rational, but with respect to different criteria than what is widely assumed.
This would be 4 really bad months (March-June) total. The reality is that the future is very uncertain at this point. The market drastically underestimated the virus in early February, and it appears the same phenomenon is happening now.
Op said that the markets are priced based partly on expectations of the future, I don't see any claim that those expectations are necessarily correct.
In terms of the Fed's effect: Both the Fed's immediate actions as well as expectations of future Fed actions have an effect on prices.
No, the efficient market hypothesis states that asset prices reflect all current available information. OP is not defending that hypothesis in their message, they’re just saying stock prices reflect expectations about the future, a much weaker assertion. Those expectations might turn out to be wrong, for various reasons, but they’re nevertheless what motivated people to invest in stocks rather than doing something else with their money.
Obviously interpretations of that information could differ... and some will be right, and some will be wrong.
But it looks like the economy has already crashed and there is not so much worse to go.
Time in the market makes money, so market is right.