Consider liquidity, though, before jumping in.
Chart courtesy of StockCharts.com
With the unemployment rate ticking down and the economy heating up, consumption is a big theme in 2014. Investors broadly divide the consumer market into two groups: cyclicals and non-cyclicals (also called discretionary and staples, respectively).
Cyclicals refers to non-essential goods whose consumption depends heavily on the economic cycle—vacations, for example. In contrast, non-cyclicals are goods that people generally purchase in the same quantity regardless of the economic cycle—health care, for example.
Fortunately, a broad range of ETFs offer exposure to specific niches within each consumer sector. These are some of the most interesting:
- Homebuilding: The iShares US Home Construction ETF (ITB | A-59) and the SPDR S&P Homebuilders ETF (XHB | A-27) both hold portfolios of companies in the homebuilding industry.
- Food: The PowerShares Dynamic Food & Beverage ETF (PBJ | B-48) provides exposure to companies in the food industry. It's also the only ETF targeting a non-cyclicals niche.
- Media & Publishing: The PowerShares Dynamic Media ETF (PBS | B-46) holds a portfolio of media companies and has recently been lifted by the frenzy of potential media acquisitions.
- Leisure & Recreation: A particularly interesting play, the PowerShares Dynamic Leisure and Entertainment ETF (PEJ | B-19) owns a range of businesses from Walt Disney to Las Vegas Sands to TripAdvisor.
- Retail: Two unlevered ETFs target the consumer retail market, while a third fund makes a 3x levered play on the space.
Be careful though: Some of these ETFs are relatively illiquid, while others are unnecessarily complex. Check out the fund reports for more information.