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Sweet 1600

NEW YORK ( TheStreet) -- On this day that sequestration has taken hold -- in what seems like the final descent into madness -- I want to offer investors some good news.

It's this: The S&P 500 index will close at an all-time high this year, and it will at some point cross the 1,600 mark. I doubt it will end the year there and will more likely settle at 1,575 for a gain of about 8% (before dividends) -- which, given last year's 13% return, represents a fairly spectacular run since 2011 began.

I don't really feel as if I am going out on a limb here. First, 1,600 is a mere 5-1/2% away. A few days of drunken ebullience will get us there. Second, as discussed in more detail below, there are a variety of positive influences on our economy that will drive equities higher.

Housing inventories . Two weeks ago at the Ibbotson Morningstar conference in Florida, I sat in on a presentation from St. Louis Federal Reserve Bank economist Kevin Kliesen. There was one statistic he let loose that made my jaw drop: housing inventories (the number of homes available for purchase) are below 2001 levels.

This, combined with an improving jobs picture, a rising GDP (see below) and low interest rates, sets the stage for the comeback in housing we've all been awaiting. I think 2013 is the year it will finally arrive.

Some people are afraid that rising interest rates will choke off the recovery in housing. The Federal Reserve has sent some conflicting signals of late -- such that policies will favor low rates only to encourage job growth -- but my read of the tea leaves (and I'm afraid that is the best anyone can do with interest rates) -- is they will remain low for the balance of the decade.

These low rates, combined with what appears to be ultra-low housing inventory, sets the stage for new and existing home purchases and all of the derivative industries housing supports such as construction equipment, durable goods, building products, electronics, hardware, lawn care equipment, Internet services and so on.

Big-ticket purchases . The only other purchase more helpful to the economy than a home is a car. The auto market is ripe for a little pep. I'm taking my cue here from what's going on in the used-car market. Prices are rising, and dealers are spending more time and effort getting their hands on used cars. This matters because by using some well structured financing, dealers can re-sell their old customers new cars for a smaller monthly payment.

Here's two data points that corroborate my thoughts about the used car market and its impact on the new car market. In the repossession market , last's year's tally of 1.3 million vehicles, was down almost 32% from the peak year of the recession in 2008, and is the lowest count in 12 years. Further, used-car seller Manheim sold 2.5 million fewer vehicles in 2012 than in 2011.