The markets may have "priced in" the impact of COVID-19 based on a couple of scenarios. But they may also have priced in other factors, such as the plateauing impact of US corp tax cuts, share buybacks and cheap capital.

It's likely however that those scenarios didn't attach a high weight to the probability like 20 million Italians living in a state of quarantine, or that 8,000 plus patients in China would die and industrial production levels would plummet.

They didn't (and still don't) know the true financial impact of the virus (even epidemiologists don't know what it's going to take to get it under control), so the true effect of the virus wasn't priced into the market, plus now many investors are trading on fear.

There were lay investors that reported betting on a covid related drop and profiting significantly by buying options (eg Wei Dai on LessWrong, will find direct link when I get to desktop).

[Usual caveat about reading too much into plays like this.]

Edit: Here's the thread, and sincere apologies for the flaketastic LW interface now, they don't even have a parent button and it took several seconds for the thread to render after the page loaded:

https://www.lesswrong.com/posts/jAixPHwn5bmSLXiMZ/open-and-w...

markets started to know the scale of U.S. government's incompetence in handling Covid 19 now.

I also knew about it a month ago, I was more optimistic then. If no new information ever comes into play or if views and outlooks never changes then markets would be static. People knew about viruses for decades now also ... does not mean all possible consequences of viruses are already priced in.