The Consumer Discretionary SPDR (XLY) is an exchange-traded fund that holds shares in a group of companies that sell products and services to consumers. Unlike the Consumer Staples SPDR (XLP), this fund is not focused on the retail sector (although its largest holding is Home Depot (HD). Instead, the largest percentage of the fund's components are in the media industry, including firms such as Walt Disney (DIS) and Viacom (VIA.B). In fact, media industry stocks account for a full 36% of the fund's value.

Another major component of the fund is specialty retail, which accounts for nearly 22% of the fund's value. These holdings include retail stores such as Home Depot and Target (TGT).

The overall idea behind this fund is that it focuses on spending by consumers above and beyond what they absolutely must purchase (so-called "discretionary" spending). Leisure, restaurants and automobile manufacturers also show up in XLY. This means that, in theory, the fund should perform well as the economy strengthens, and probably will perform best in a slightly inflationary environment since stores, restaurants and travel destinations will then be able to raise prices, thus increasing profits. This last part of the equation may explain why XLY, though certainly ahead on the year, has not been an even stronger performer despite our nation's strong recent economic growth.