Stock Market continues to beat forecasts

Six months ago my stock market forecasting models predicted that the first half  of 2014 would be nearly flat -- just a 2% gain.  Instead, the market (as measured by the broad based Value Line Arithmetic Index) rose a quite respectable 7%.

Why is the market beating the models' expectations? My best guess is that the it is perfectly clear to all that the Federal Reserve has no intention of letting the economy stall in the near term.  So much the better!  It looks like it will be a long time before the Fed takes the punch bowl away from this party.

My 6 month stock market forecast for the second half of 2014 is slightly more positive than last month. The prediction remains muted, a bit worse than the long term average. 

Probable market gain from 7/1/2014 to 1/1/2015:  2% to 4%  (Average 6 months since 1984: 4.8%)
Probability of at least breaking even :    65%  (Average for all months since 1984: 73%).

For the past year most of the surprises have been positive, so I would not be surprised if that happened again.

(Click on image to enlarge.)