It's been shown time and time again (e.g. in Stocks for the Long Run) that the most profitable time to buy stocks is when sentiment is poor and that stocks usually recover very quickly at the end of a recession. Similarly, Robert Schiller notes in Irrational Exuberence that stocks fluctuate much more than the present value of future dividends (or, I would note, future earnings).

If the market is reasonably efficient, why wouldn't this become a self-defeating prophecy, with the eventual recovery priced in throughout the whole recession? Given that the business cycle isn't predictable and owning stocks with a short time horizon is generally a bad idea, why would anyone buy stocks in the first place if they weren't prepared to ride out a recession if one happens?