While the overall stock market tends to trend higher over time, individual sectors within the market tend to take the lead. At the tail end of the 2022 bear market, tech companies kicked off the rally as AI became a bullish theme.
Since then, the market has rushed higher. Other sectors have started to show some signs of life in recent months. That trend will likely continue now that interest rates are coming down.
Lower interest rates make it easier for companies to expand and for consumers to spend. Consumer-related stocks, which have been market laggards, could now see some signs of life.
That includes spending on dining out, which has waned over the past year. Yet stocks like Darden Restaurants (DRI) are starting to see signs of life.
Shares are starting to trend higher, but are only up 16% over the past year, about half the return on the S&P 500 index. Yet shares are reasonably priced at 17 times earnings, and the chain sports a 9% profit margin, a healthy level for the industry.
Action to take: Investors may like shares here, given the current uptrend in shares. Plus, at current prices, Darden pays a 3.4% dividend.
For traders, the January 2025 $170 calls, last trading for about $5.00, could see mid-to-high double-digit returns if shares stage a year-end rally.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.