With the S&P 500 down 5.1% in January, the January Barometer is getting a lot of press. Here we discuss the reliability of this indicator and several factors that may lead to better performance in February.

Our Five Forecasters indicators are sending mid-cycle signals, although stock valuations, the ISM Manufacturing Index, and market breadth have flashed some warning signs. Although volatility may remain high, we expect the latest stock market correction will not turn into a bear market.

The start of fourth quarter earnings season may help the stock market find its footing. The twin drags of energy and U.S. dollar strength could again wipe away earnings gains; but ex-energy, we see mid-single-digit gains.

It was a lackluster 2015 for a stock market that faced many challenges. As we turn the page to 2016 we look forward to a potentially better year for stocks.

The Fed’s decision to hike rates is a vote of confidence in the U.S. economy. We expect the likely gradual pace of rake hikes may provide support for stock valuations, and potentially provide some support for interest rate sensitive areas.