TWM

Several GDP nowcasts for the upcoming Q3 report (due on Oct. 29 from the Bureau of Economic Analysis) are pointing to a strong rise.After plunging in March and April, the US MEI rebounded sharply but has been treading water in recent weeks.The standard numbers still leave plenty of room for caution. That includes the weekly jobless claims numbers.

U.S. stock and corporate bond markets performed extraordinarily well from the March financial shock caused by COVID-19 to the end of last month.Then, three consecutive weeks of decline in the three major stock market indexes have been followed this week by a global slump attributed to fears of new lockdowns.A period of disconnect of financial markets with the underlying real economy has culminated in a revelation of the former’s high dependency on Federal Reserve policies.

The Congressional Budget Office is making some projections that are breath-taking when it comes to the growth of the federal debt, but also how slow the economy is to grow.The CBO projects economic growth will average only 1.6 percent over the next thirty years and the federal debt in 2050 will be almost double the size of annual GDP.Furthermore, debt loads all over the economy are at or near historic highs and businesses and consumers will be hard-pressed to generate sufficient cash flow to carry the debt.

We are on track for the worst September since 2002, when the market sank 11% for the month.Don't underestimate the dip-buyers. Mostly retail types, they have been in control of this market since March 23.Today's action marks the beginning of the weighing machine market.

The death of Supreme Court Justice Ruth Ginsberg has sparked a replay of the 2016 passing of Justice Scalia.The Federal Reserve is trying to plug a hole that fiscal policy was widely expected to fill by now.The pickup in volatility over the last couple of years is more akin to a broader "topping" process for the markets.

The Dow and S&P 500 recently broke below key support.Fresh worries are causing the bears to color outside the lines.The action in the near-term could tell us a lot about where we go from here from an intermediate-term basis.

A new wave of policy proposals is gaining steam, centered around the idea that the US can use unlimited amounts of debt (or money printing) without consequence.Currently, the US does not "print" spendable dollars. The increase in debt, however, has been having measurable consequences on the rate of growth in the economy.Debt in the US surpassed 400% of GDP for the first time in history, setting the stage for weak economic growth to come.No, in America, money does not grow on trees, and the increase in debt already has had profoundly negative impacts on the rate of improvement in the standard of living.Under record amounts of debt, economic growth will continue to fall in real terms, pushing down the risk premium on long-term Treasury bonds.

It has been a rough start to the fall season, with a 10% materializing in the S&P 500 over the last 20 days so far.Unfortunately, due to numerous detrimental fundamental factors surrounding the economy, it is still likely to get worse before things get better.Stocks are far from cheap right now, and it is unlikely that most forward estimates can be relied on in my view.There is likely more downside ahead, roughly to the 3,000 level in the S&P 500 in a base-case scenario, and plausibly lower in a worst-case scenario outcome.