If you need a literal string "\newline", try the following:
for f in *.md; do cat "$f"; echo "\newline"; done > output.md
This suggests that output.mddoes not yet exist. If so (and you want to include its contents in the final output), you can do:
for f in *.md; do cat "$f"; echo "\newline"; done > out && mv out output.md
This prevents an error cat: output.md: input file is output file.
, , , rm.