Some stocks will never recover, and some of that recovery will be companies that don’t exist yet.
While these things might offset to create a market recovery, there’s no way to price in the expected cash flow for a company that doesn’t exist.
The price of Delta, United, American etc. gets discounted because the risk of each individual stock being bankrupted is high. But they don’t go to 0, because there’s also a chance each of the airlines might somehow survive to next year and go back to profitability.
If all the airlines go bankrupt, someone will step in and create new companies in the sector by buying up the bankrupt companies’ physical assets, but the existing shareholders will lose everything despite the sector itself being viable in the long term.
TL;DR if the sector as a whole is healthy, and you’re willing to balance an investment portfolio across the whole sector, then your exposure to future revenues should be fairly healthy even if one company goes bankrupt. But you’re absolutely right that prices don’t behave as though this is the case.
But I don't think that market participants are nearly good enough at prediction for that to happen.
Which as we've seen during various recessions doesn't seem to hold true.