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Instead of using hundreds of factors in complex algorithms like professional economists, I have been using disposable income as the sole factor to predict the movement of stock market and economy for the last many years, on seekingalpha.com. Till now, this single factor has been giving accurate predictions.

Disposable income of masses helps in creating demand for new products and services and helps grow the economy. High disposable incomes of people in United States lead to rapid growth of new industries and services here. On the other hand, countries with feudalistic societies did not allow good wages for the masses, and thus did not have an environment where new industries and services could grow. Let us look at some of the factors in United States today:

EURO CRISIS:

To understand if the euro crisis would impact United States, we need to look at history to understand if any previous international crisis impacted United States. The Asian crisis of 1997, the Japanese crisis of 1991, and the World War II in Europe did not create any major negative impact on the United States economy or its stock market. Today, the United States economy is even lesser dependent on exports than previously. Therefore, the probability of a euro Crisis (if it happens) to impact United States is low.

HOUSING:

The housing inventory which was more than 10 months till last year is significantly low in many major markets. Many foreclosure condos in Fort Lauderdale area in Florida that were available for $40K till last year, are now available for double that price now. Recent reports suggested that home prices are between 5 to 10% higher across United States than last year. If the government allows getting home loans easier, the housing market would grow rapidly, leading to rapid job growth.

GAS:

Retail gas prices are on the verge of falling down with crude falling 20% below the recent peak. There are no signs of any imminent war with Iran yet.

INTEREST RATES:

Interest rates and mortgage rates are at the lowest levels and would continue to be the same at least for a year or so, as ensured by the Fed. Consumers refinancing their loans would benefit from these low interest rates.

DEVELOPING COUNTRIES:

High inflation in developing countries has been negatively influencing their ability to take jobs out of United States via outsourcing contracts. Though many countries have started depreciating their currencies to make their exports and services more competitive, it would take some time to show the impact on the US job market.

DOLLAR:

A higher dollar would be make imports cheaper, thus helping the consumer.

FLOW OF MONEY:

Money is flowing back to United States from Europe and Asia, and that should help the economy.

ELECTION YEAR:

Further, this being an election year, government is making efforts to ensure job growth and reduce outsourcing of jobs to foreign countries.

With the current circumstances, the disposable incomes of masses should continue to go up, unemployment should fall and it appears that the Dow should move above 13500 before the end of the year.

Source: Dow Will Be Closer To 14000 By The End Of 2012