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The past few years in the market have been full of surprises -- most of them bad. This year, we should get some better news. The Standard & Poor's 500 Index ($INX) has new highs in sight, as the U.S. economy and corporate earnings break records. Gold could hit new highs, too. And hey, you might be buying a new car, finally.

But there will be plenty of bad along the way -- as the European debt crisis boils over and inflation returns. On a small scale, Facebook could wind up in unexpected hands instead of going public.

Here's a look at some potentially market-moving possibilities for 2011, and how to play them as an investor.

The S&P 500 closes in on all-time highs

Still shellshocked by the Great Recession, many Americans probably haven't realized that the U.S. economy seems set to break several important records this year because growth is back. Both corporate earnings and U.S. gross domestic product will reach their highest levels ever.

This will push stocks to new highs for the recovery -- and the Dow Jones Industrial Average ($INDU) and Standard & Poor's 500 Index to their first new all-time highs since 2007.

Hard to believe? Consider that we're in the third year of the presidential election cycle -- a year in which the party holding the White House typically moves back to the political center and stokes the economy. Historically, this year of the cycle brings improved business confidence and economic growth, and stocks move higher.

Over the past 80 years, during the third year of the presidential cycle, the S&P 500 has gone up every time except one, according to market analysts at Deutsche Bank. The average return is 17%. That alone would take the S&P 500 to 1,470.

But the gains could be bigger this year. Deutsche Bank analysts expect the economic rebound to push earnings at the S&P 500 companies as a group to $96, surpassing the prior peak of $91.47 in 2007. Put a reasonable market valuation of 16.5 times earnings on that, and you get an S&P 500 that hits 1,584 during the year -- above the October 2007 closing high of 1,565. Those analysts predict the S&P 500 will close the year at 1,550.

How to play it: Defensive stocks in areas like health care, consumer staples and utilities lag during an economic rebound, so avoid them, says Goldman strategist David Kostin. Instead, go with cyclical stocks, which do the best in a rebounding economy. Goldman suggests owning cyclicals in information technology, financials and energy -- like Qualcomm (QCOM, news), Bank of America (BAC, news), JPMorgan Chase (JPM, news), Schlumberger (SLB, news) and Occidental Petroleum (OXY, news). (For quality companies and banks to own in a rebound, see "5 great companies to own now" and "5 reasons to love big banks again."

2. Gold hits $1,800 an ounce

Gold has retreated in 2011 to around $1,360 an ounce from above $1,400. Is this a signal that gold's day is done? Now that the economy seems to be on the mend, will that take much of the fear premium out of the yellow metal?

No, says Midas Fund (MIDSX) manager Tom Winmill, for a simple reason: Inflation is on the way.

Winmill thinks concerns about inflation could easily push gold above $1,600. Then it could go to $1,800 on scary headlines -- say, defaults among U.S. municipalities or the perception that some states are approaching insolvency because their budgets are overloaded with pension and health-care obligations. He puts New York, Illinois, California, Wisconsin and Florida high on the list of states to watch. "A lot of these states have economies bigger than Greece or Portugal, and they have murkier financials," says Winmill.

Winmill's outlook on inflation, a key scenario for the gold bugs, is certainly not the consensus view. Goldman Sachs, for example, believes core inflation, which excludes food and energy prices, will remain "extremely low" at just 0.5% during the next two years. The reasoning is that capacity utilization is around 75%, well below the long-term average of 81%, and unemployment is high. So both goods and labor inflation seem improbable.