The market has already registered a huge shock from the projected GDP of minus 4 or 5 percent for the fourth quarter, but the shockwave has yet to register fully in the real economy, says Pimco co-CEO Mohamed El-Erian.

“The markets are telling you there’s a cardiac arrest in the system,” El-Erian told CNBC.

“Every pool of capital now is facing challenges.”

“The bond market is telling you this is beyond a flight to quality, this is a flight to liquidity.”

The nasty reality, El-Erian notes, is that stock investors are the most vulnerable in this economy. Equity holders either see their holdings diluted or find their interests rank below the taxpayers when the government steps in.

Fortunately, unlike when Bear and Lehman failed, banks are continuing to function despite the fact that their shares have been hit hard, he says.

“That’s why you don’t get the sense of panic in the short-term funding market now,” El-Erian says.

But, if ratings agencies move to downgrade banks, “we could be in an entirely different world.”

Phil Orlando, chief equity market strategist at Federated Investors, says we are looking at probably three consecutive quarters of negative GDP growth, with current quarter expected to be the worst.

"We're going to hit an inflection point where the economy improves, but no one believes it yet," Orlando told CNN.