The word "volatile" doesn't seem quite adequate to describe the stock market and in percentage terms bonds as well. Daily swings of 1,000 points for the Dow are not uncommon. There are even 2000 point down days.

There are several factors that explain the volatility and market swoon. At first, it was profit-taking. In 2019 stocks advanced at a faster pace than earnings growth, which meant valuations became stretched. Investors took some chips off the table. Understandable. 

Then there is the coronavirus and its unknown impact on GDP here and overseas. How bad it gets and how long it lasts is unknown. A recession is likely. The slowdown is more negative for some industries. Travel-related industries -- airlines, cruise ship companies, hotels, and restaurants -- will be most impacted. They already are because meetings and conferences are being canceled and companies are curtailing some travel and telling employees to work from home, if possible. 

While we can't put a fine point on the economic impact, this much is certain. One-time events impact stocks and then they recover. That was true for earlier viruses (there were many), 9/11, the invasion of Kuwait, and more. The vast majority of those affected by this virus will recover at home then go back to work and normal activities. 

While investors and the media focused on stocks, there was a lot going on in the credit markets. The Federal Reserve cut its short-term rate by 50 basis points and then reduced them to zero citing the unknown but surely negative impact of the virus on what used to be a strong economy. The yields on Treasury issues with maturities of ten years or less are well below 1 percent. The shortest maturities are barely positive. Yields on money-market funds fell further. 

Falling interest rates have several benefits. Stock valuations are inversely tied to rate changes, so that alone will raise the present value of future earnings and dividends. For that reason, stocks are more undervalued now relative to bonds than they were weeks ago. Companies can borrow cheaply or refinance debt. Homeowners will save as well. There are benefits for the economy, companies, and stockholders as rates fall. We seldom hear about them.

So when will the stock market improve? The S&P 500 is already down 28% so bad news is being factored in. All it will take is an improvement, not a cure or vaccine, just a sign that the situation is stabilizing and some progress is being made. Soon it would be nice.