January 2014 baffles analysts as economy stalls

This January has been a baffling month for many economists, as seemingly none of the forecasting conducted at the end of 2013 in regards to the state of the economy seems to be panning out. Interest rates on home loans aren't moving upward, the stock market has begun waning after barreling toward record highs for much of the tail end of 2013 and consumer sentiment isn't moving upward, the latest data indicates.

The final reading on the Thomson Reuters/University of Michigan overall index of consumer sentiment was down in January from the 82.5 figure posted in December to a meager 81.2. While this is up from the preliminary reading of 80.4 put out by the researchers and in line with anticipated data (most analysts were looking for at least a read of 81.0), this number is hardly adequate enough to declare 2014 a rebuilding year – at least so far.

What's more is the fact that consumer sentiment appears to be waning most significantly among households with smaller family income. Upper-income households, or those who bring home at least $75,000 annually, are actually exhibiting a jump in confidence, signifying a widening gap in attitudes between the rich and the poor, which could likely be attributed to government interference into the free market.

"Prospects for either consumers' own personal finances or for the economy as a whole have remained more resistant to improvement, especially longer term prospects," survey director Richard Curtin wrote in a statement, as reported by FOXBusiness. "This has prevented recent economic gains from building the type of positive upward momentum that has sparked and sustained increases in consumer optimism and confidence."

Consumers aren't the only ones who are pessimistic about the state of the economy, as Wall Street has proven to be much more reserved over the past few weeks than it had been earlier in January and at the tail end of December. While the news could easily swing back into the positive realm by next week, some prognosticators are worried that we could be nearing the end of a bull cycle that could spell out doom for those with an early retirement strategy.

In 2013, the Standard & Poor's 500 (S&P 500) grew by nearly 30 percent and helped many investors regain a good chunk of the equity lost during the height of the Great Recession. However, in January alone, the contrast has been stark, as the S&P 500 has already shed 3 percent in just the first four weeks of the new year, marking the worst first-quarter kickoff on a percentage basis since 2010.

A big reason for this is troubling data coming out of emerging markets that indicate foreign currencies are seeing the kind of inflation and deflation that is troubling to most investors. For instance, the Turkish lira, South African rand and Russian ruble all sustained major blows over the past week, and comments from international leaders – especially a recent cautionary speech from a Hungarian minister – have made traders skittish, forcing them to ditch risky currencies.

One even more substantial blow was the fact that eurozone inflation has cooled much lower than economists had expected, dropping to 0.7 percent in January from a more robust 0.8 percent in December.

All of this news just goes to show that it's impossible to predict exactly where your investments will take you but that  you should be wise about asset protection so that your retirement investments don't get compromised as a result of misinformation.