There are two areas of consumer spending that economists and traders focus on. They are both on completely opposite ends of the market cycle and can be useful in different market conditions. While they have fancy names they boil down to "consumer needs", and "consumer wants". Today we hope to simplify the two and shed light on when you may want to have some of each in your portfolio.

Currently the markets are enjoying healthy gains on the year (over many years for that matter) and consumers are out spending their money everywhere. Data shows that almost everything besides car sales are skyrocketing and the consumers financial health is strong in the states. This won't stay this way forever though.

In rough times consumers forego the fancy dog food, watches and cars and tend to only purchase the necessities. In periods such as this many will want to include those investments in their portfolio. Stocks that offer true needs of a consumer. Think of the things you use on a daily basis. Toothpaste (hopefully), toilet paper (again..hopefully), soda, cigarettes, you get the point. If the economy were in bad shape it is highly likely that you would still consume these products. If one did not want to seek out each stock individually there is an ETF that participates in the Consumer Staples space is the (XLP  ).

Now let's get back to the fun stuff. The economy is quite strong at the moment and consumers are willing to buy more things that they want, but not necessarily need. This is called the Consumer Discretionary space. These are products that you spend money on after all your financial obligations and needs have been met. Think washing machines, trips to the movies, eating out at restaurants, and amusement parks. These types of companies tend to flourish in the good times. Again if you do not like picking individual stocks there is a few ETF's that offer this sector. One is the (XLY  ).