There are short-term trends that can have implications for the long-term investor’s investment portfolios. The first trend and outcome for 2014 is Americans are earning less and have less money to spend. With less disposable income, we will see less spending. This will dampen an improved U.S. economy this year. This is my theme for predictions and outcomes for 2014. I hope most Americans understand that the U.S. economy is very heavily dependent on consumer spending, which makes up 71 percent of the U.S. GDP number. So if average Americans are not out spending money, then the economy doesn’t do well.

Unfortunately, the strongest piece of evidence we just experienced of a consumer shutdown showed up in our paltry holiday season spending. Going into the 2013 holiday season, the National Retail Federation had predicted that holiday sales would rise by a positive 3.9 percent, but instead they dropped 3.5 percent. U.S. families had less money in their pockets in 2013, so they spent less on holiday shopping. Most economists are expecting the same in 2014. Real median household income was at its lowest level in 2013. In fact, real median household income has declined by a total of 8 percent since 2008; at the same time, there has been a movement of income away from the middle class toward the high earners at a record high level. Normally, these extremes in income dispersion foreshadow financial market and economic calamities. The current income dispersion and record extremes are well above levels thought to have been prevalent prior to the 1929 U.S. stock market crash and the Great Depression. I believe 2014 will face tremendous difficulty all because U.S. income, the foundation of real economic growth and wealth distribution, will continue to get worse.

The second trend and outcome for 2014 is higher taxes. When the government raises taxes, it reduces the amount of money that people have in their pockets. Tax season and April 15 are only a few months away. Millions of American families are going to find out that they have much higher tax bills than expected. Congress allowed 55 tax breaks to expire at the end of 2013; added on top of that are the 13 major tax increases of 2013. It’s not going to be a pretty sight.

The third trend and outcome of 2014 will be higher interest rates regardless of what the Federal Reserve or media outlets say. Higher interest rates mean higher debt problems, which means less money for consumers to spend in the U.S. economy. On December 31, 2013, the 10-year U.S. Treasury note rose to 3.03 percent. For the majority of 2013, it was in the 1 to 2 percent range. The reason the yield on the 10-year is such a critical benchmark is that mortgage rates and other loans in our economy are influenced by it. The Fed says interest rates are not going up, but they are. The National Association of Realtors reported beginning in September 2013 that it had witnessed the largest drop of signed home contracts in over 40 months and that is one of the early signs of weakness. This was followed by December 2013, with mortgage applications collapsing an astounding 66%, which is a 13-year low.

Here is the last trend and outcome for 2014: The U.S. stock market has shown a whole host of signs that the irrational stock market bubble we are in is going to burst. Right now, the median price-to-earnings ratio on the S&P 500 has reached an all-time record high. This while margin debt at the New York Stock Exchange has reached its highest levels ever.

So the bottom line is that Americans and U.S. investors are going to need to traverse a number of land mines in order to find peace of mind and long-term sustainable growth. Investing in 2014 will require the height of risk management and mental flexibility because investors can’t stay in one place for too long. The traditional buy-and-hold investing doesn’t work anymore.

Dawn Bennett is CEO and Founder of Bennett Group Financial Services. She can be reached at