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U.S. Stocks ended the third quarter on a bad note.
The S&P 500 Index dropped 28.98 points, or 2.50 percent, to finish at 1,131.42. The Dow Jones Industrial Average fell 240.60 points, or 2.16 percent, to end at 10,913.38. The Nasdaq Composite declined 2.63 percent.
For the quarter, the Dow fell 12 percent, its worst performance since first quarter 2009.
Financial markets performed poorly because investors were scared and rushed into safe-havens like U.S. Treasuries. They were scared because the global economy looks increasingly shaky.
Some analysts, like Craig Ferguson of Antipodean Capital Management, believe the current risk-asset liquidation move alone may take the U.S. stock marketdown another 10 to 15 percent from current levels.
What the market will do from there - rally, fall further, or trade sideways - will depend on how the economy performs going forward.
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Westpac Banking Corporation, one of the "big four" Australian banks, listed the following 10 "inconvenient truths" about the global economy, which explain why the global economy has performed poorly in the third quarter and cast a dark shadow on its future prospects.
1. The OECD economies appear to be locked into a low growth environment, where the downside risks to real activity dominate and there is a significant threat of a return to recession
2. Despite the obvious dynamism of the BRICs and other developing economies, and the greater policy latitude available to them, the emerging world is not immune to the OECD's woes and can only shoulder so much of the burden of driving the global business cycle.
3. For all their mercurial tendencies and occasional bouts of irrationality, the financial markets, and in particular the underlying trends in financial asset prices, more often than not deliver messages that policy-makers should listen to.
4. Currently, global policy makers are facing something of a "crisis of competence".
5. A more extensive Greek debt restructuring, the significant expansion and aggrandizement of the role of the ESFS (extending to large scale capital injections into banks), and additional "non-standard" policy support from the ECB, could go some way towards stabilising the Eurozone crisis (although such a strategy is not without significant risks and costs, especially for Germany and the ECB).
6. The precise dynamics of a Eurozone break up are impossible to predict with any degree of certainty, but there is little doubt that it would prove economically catastrophic, and not just for Europe.
7. If the Eurozone fragments, the whole post-war collectivist/integrationist superstructure of Europe is at risk of collapse.
8. Although the immediate focus is on Europe, the US's underlying economic problems should not be underestimated or forgotten.
9. Countries seldom grow out of public sector debt crises.
10. There will be no early escape from unconventional monetary policies.