Our health care system is ailing and Americans aren’t faring much better:  the health of many U.S. citizens is going down the tubes. About 34% of Americans are obese, and children hold a 31.7% obesity rate. Yikes! This is a burden on the overall economy, says Marc Litchfield for Investment U, as the additional risk of associated illnesses like heart disease, diabetes and other problems, obese Americans cost the country $147 billion in 2008.

The cost of these people are going to hit taxpayers, whether it’s in higher health insurance premiums or higher taxes. [6 ETFs to Consider in a Recovery.]

You can harness this through investment by looking at the stores people hit when they want to make a change:

• When Americans change their diets, they often turn to stores such as Whole Foods (NASDAQ: WFMI) or other purveyors of healthy and/or organic goods.
• Food distribution is another avenue to explore, as the agricultural powerhouses provides seeds and genomics to farmers. An increase in demand for vegetables should benefit companies such as Monsanto (NYSE: MON).
• Check out stores that sell health and fitness equipment. Retailers such as Target (NYSE: TGT), Wal-Mart (NYSE: WMT) and Amazon (NASDAQ: AMZN) have aisles packed with hand weights, yoga mats, workout clothes and even some larger equipment.

For more stories about consumer discretionary, visit our consumer discretionary category.

• First Trust Consumer Staple alphaDEX (NYSEArca: FXG): Holds Whole Foods , Safeway (NYSE: SWY), Del Monte (NYSE: DLM)

• Vanguard Consumer Discretionary (NYSEArca: VCR): Holds Target and Amazon

• Market Vectors Agribusiness (NYSEArca: MOO): Holds producers of grains and fertilizers

Discretionary spending – the category of spending that usually focuses on “wants” instead of “needs” – is showing some lag. Now many upper-income families have adopted frugality as their new mantra. Data from the ETF Desk says that spending in upper income households, those making more than $90,000 a year, has fallen 13% from January and 19% from a year ago. [ETFs to Play the New Retail Climate.]

In order for a solid recovery in consumer spending to take shape, a turnaround in spending within this subset of spenders is needed. These are the spenders with the truly disposable income and access to credit. So, whatever the word on the street is, that fact remains that consumers are not spending the way they did pre-market meltdown. [As Auto Sales Rebound, Play It With This ETF.]

Retail spending did get a boost this morning, rising 0.3% in February from a month earlier. Economists had expected a decline by the same amount. More telling, perhaps, might be the consumer confidence figures, which showed a decline instead of an anticipated increase. Consumers are still feeling somewhat skittish as the job market remains uncertain, which means that values and bargains might still be the order of the day when all is said and done. [Can Luxury Withstand the Bargain-Hunters?]

For more stories about retail, visit our retail category.

• SPDR S&P Retail (NYSEArca: XRT)

• Consumer Discretionary Select Sector SPDR (NYSEArca: XLY)

• Vanguard Consumer Discretionary ETF (NYSEArca: VCR)

This year’s markets were topped by emerging markets with the MSCI-EAFE up around 80.2% ending Nov. 30, writes Stacy Schultz for Financial Planning. John Gabriel, ETF analyst at Morningstar, attributes the high growth in emerging economies to a growing middle class, higher domestic demand and decoupling from Western countries. [More on emerging markets.]

• Shares MSCI Emerging Markets (NYSEArca: EEM): up 67.5% year-to-date

Commodities also saw a good spike on demand from a burgeoning middle class in emerging countries. Some high-performing commodities this year can be seen in gold and coal ETFs. [More on commodities.]

• SPDR Gold Shares (NYSEArca: GLD): up 24.2% year-to-date

• Market Vectors Coal ETF (NYSEArca: KOL): up 143.8% year-to-date

The top sector was technology. U.S. investors liked the balance sheets of giant technology corporations and the sector saw good performance and comparable inflows throughout the year. [More on the technology sector.]

• Technology Select SPDR (NYSEArca: XLK): up 51.5% year-to-date

The second best sector was consumer discretionary, a good indicator for investor confidence in an economic recovery. [More on retail.]

• Vanguard Consumer Discretionary (NYSEArca: VCR): up 48.4% year-to-date

Fixed-income ETFs benefited from the record inflows into securities. Investors wary of long-term Treasuries and interest rate risks choose to invest in short-term bonds and Treasury inflation-protected securities (TIPs). Dan Dolan, director of wealth management strategies at Select Sector SPDRs, warns that inflows into bond ETFs could come to a halt as yields dry up. Those investors may then turn to equities instead. [More on bond ETFs.]

• iShares Lehman 1-3 Year Treasury Bond Fund ETF (NYSEArca: SHY): up 0.4% year-to-date; yield is 2.3%

For full disclosure, Tom Lydon’s clients own shares of SHY, TIP, GLD, EEM and XLK.

Max Chen contributed to this article.

Assets: $152.5 million

Objective: Tracks the MSCI U.S. Investable Market Consumer Discretionary Index.

Holdings: Amazon (NASDAQ: AMZN), McDonald’s (NYSE: MCD), Target (NYSE: TGT) and Time Warner (NYSE: TWX).

What to Know

• Low expense ratio 0f 0.25%
• Holds 383 companies across the consumer discretionary sector

The Latest News

• Black Friday is just around the corner, and shoppers are feeling less frightened than they were last year. After all, just before the holidays in 2008, the recession hit with full force and consumer fear was at its apex. This year, those concerns have leveled off somewhat. The National Retail Federation predicts a 1% holiday sales increase from last year.
• For some retailers, Black Friday has already begun. Amazon started Black Friday pricing on Monday, while many brick-and-mortar stores will be extending their sales through the weekend, rather than for just a few hours on Friday.
• This year’s must-have toy is a little $10 robotic hamster known as the Zhu Zhu Pet. Its popularity is an indicator of where consumers are at these days: they want things at a bargain price.

Two sectors that have performed well over the past year and are poised to continue moving upward in a recovering economy are technology and consumer discretionary, according to Benzinga.com. Additionally, the transportation sector seems to have some appeal because transportation is required to move finished goods.

Technology is prospering because consumers have an insatiable desire for innovation, while the latest technology gives businesses a much-needed competitive advantage. (More on technology).  The sector can be accessed through the iShares Dow Jones U.S. Technology Sector Index Fund (NYSE Arca: IYW), which is up 54.6% year-to-date.

The consumer discretionary sector has been pummeled by recent economic conditions as consumers remain loath to spend. As the recovery continues and confidence is regained, though, it’s wise to keep in mind that the most beaten-down areas offer the greatest potential for growth. (Why donsumer discretionary is hot).  It can be accessed through the Vanguard Consumer Discretionary ETF (VCR), which is up 39.6% year-to-date.

On the same token, since this is expected to be a soft recovery, it’s worth keeping an eye on the consumer staples sector, as well. The unemployment rate is at a 26-year high, which means that there are still millions of people feeling the pinch. When they shop, they’re looking for what they need, not what they want. PowerShares Dynamic Consumer Staples (NYSEArca: PSL) is up 17.5% year-to-date.

The transportation sector has been hit hard and will naturally improve as the economy does; even Warren Buffett seems good value in the sector, based on his recent acquisition of Burlington Northern (NYSE: BNI). (Where transportation goes from here).  It can be accessed through the iShares Dow Jones U.S. Transportation (IYT) which is up 13.4% year-to-date. For more stories on the transportation sector, visit our transportation category.

The shipping sector is another indicator of how the world is recovering. Once global demand resumes, shipping prices should recover and an increase in available ships will be moot. (What challenges are facing the shipping industry?) As consumers begin to spend more and nations struggle to rebuild, this sector will ultimately reflect a shift in tides. Claymore/Delta Global Shipping (NYSEArca: SEA), up 29.1% year-to-date.

Last, but certainly not least, consider emerging markets. While the United States recovery lags, that doesn’t mean there are no opportunities. Emerging markets have outperformed handily this year – iShares MSCI Emerging Markets (NYSEArca: EEM) is up 61.6% year-to-date, vs. the S&P 500, which is up 20.4%.

For full disclosure, Tom Lydon’s clients own shares of EEM.

Kevin Grewal contributed to this article.

Wal-Mart (NYSE: WMT), Target (NYSE: TGT) and Amazon (NasdaqGS: AMZN) are engaged in an online price war over DVDs, reports Jeremy Hobson for Maretplace. (How name brands are boosting consumer staples).

Wal-Mart lowered prices of popular DVDs to $10 in hopes that the low prices would help draw customers to shop at their site and buy big-ticket items. Not to be bested, Amazon is offering DVDs at $9.99, but Wal-Mart countered with a $9.98 offer. (Internet ETF to capture holiday shopping climate)

Jeff Dotson, marketing teacher at Vanderbilt University, says these companies are operating on thin margins, and if enough copies of DVDs are sold, the companies can take a hit. Frank Luby, pricing expert at Simon Kutcher and Partners, argues the online retailers are taking a necessary hit in order to obtain the title of “lowest-priced retailer.”

For more information on the retail sector, visit our retail category.

• First Trust Dow Jones Internet Index (NYSEArca: FDN): currently up 67.5% year-to-date; AMZN is 5.6%

• Vanguard Consumer Discretionary ETF (NYSEArca: VCR): up 37.3% year-to-date; TGT is 3.0%, AMZN is 2.8%

• Retail HOLDRs (AMEX: RTH): up 24.3% year-to-date; WMT is 20.2%, TGT is 8.5%, AMZN is 7.3%

Max Chen contributed to this article.

U.S. consumer sentiment declined this month while Americans continued to worry about their finances and paying down their debts. Despite the drop, sentiment is higher than it was a year ago at this time, reports Steven C. Johnson for Reuters. Most consumers felt that their financial situations  had worsened in October for the 13th consecutive month. It’s the longest and deepest decline in the survey’s history. (Can bargains be found in luxury ETF?)

Consumer spending in September also dropped by the largest amount in nine months. This comes despite a government report showing that the economy grew 3.5% in the third quarter and shows how shaky the economy still is. (The GDP report). Economists fear the consumers are going to continue cutting back, making for a rocky road to recovery, reports Martin Crutsinger for the Associated Press.

• Vanguard Consumer Discretionary (NYSE: VCR) is down about 0.5% this morning

President Barack Obama said today that the stimulus plan created or saved about 650,000 jobs. The numbers are the first solid look at how the program has impacted the economy, CNN Money says. Administration officials say that 3.5 million jobs will have been created or saved by the time the program comes to a close.

Chevron (NYSE: CVX) reported that its profits slipped 51%. The oil giant was able to boost revenues by increasing its oil production by 11% in the third quarter, the Associated Press reports. (Five factors benefiting oil ETFs).

• PowerShares Dynamic Energy Exploration & Production (NYSEArca: PXE) is down nearly 2% this morning; Chevron is 5.5%

For more stories on energy, visit or energy sector page.

The plan does help tackle the feud between automakers and statehouses over emission standards. Automakers get one single standard and the states get their emission standards honored. New vehicles would be 30% cleaner and more fuel-efficient by the end of the program.

Which ETFs have the potential to benefit from this plan, and which ETFs might be on the losing side? (But remember: these aren’t predictions, and we’re still watching the trend lines to see what actually transpires once this plan is fully in effect in 2016).

On the Potentially Negative Side…

If we reduce our dependence on oil and don’t need as much of it to keep our cars operating, that may naturally create less demand and possibly keep prices down.

• United States Oil (USO): down 1.2% year-to-date

The same goes for gas – more fuel efficiency, fewer fill-ups, less gas needed. Will it equate to lower prices?

• United States Gasoline (UGA): up 52.2% year-to-date

On the Potentially Positive Side…

Overall, the environment should be a winner with this plan. Cleaner air, fewer emissions and some kind of help toward solving the problem of global warming. For that reason, environmentally focused ETFs could reap the rewards, as well, as the movement toward cleaner energy and conservation gathers interest.

• PowerShares Wilderhill Clean Energy (PBW): up 5.6% year-to-date

Consumers could win, too. While these cars could cost up to $1,300 more, greater fuel efficiency could ultimately translate into more money in their pockets over time. That could mean more disposable income and greater spending on discretionary items.

• Vanguard Consumer Discretionary (VCR): up 11.2% year-to-date

Platinum could benefit, too. After all, it’s a primary ingredient in catalytic converters, which are devices designed to reduce the toxicity of emissions. Of course, while the catalytic converter will still be a component of the new cars, there’s no way to clean carbon dioxide out of a car’s exhaust. The only way to reduce that is to reduce the amount of fuel burned, says Bay News 9.

• E-TRACS UBS Long Platinum ETN (PTM): up 17.8% year-to-date

The U.S. auto industry could benefit from this new push, too, if they create the right kind of vehicles in a cost-effective way.

Penni Crabtree for San Diego Union Tribune reports that distressed retailers are already rapidly discounting prices before the official startup of the holiday season in hopes of giving their near financial futures some hope. Black Friday marks the traditional beginning of the period in which retailers reach profitability for the year, or get in the black.

Holiday season sales growth is expected to be around 2.2% this year, compared to 4% previous years. As September sales have been sparse, October was horrible, and November and December have left little hope.

The flip side is that recession-weary consumers will get more bang for their buck but even if the slashed prices attract consumers the retail sector faces many challenges. It’s for this reason that Black Friday sales typically intensify during a downturn, reports Nicole Maestri for Reuters.

Teen apparel and electronics are anticipated to be the hardest hit, as there haven’t been any outstanding new advances in the industry. The so-called silver lining in the economic meltdown are the high-definition televisions, or HDTVs. This year prices for HDTVs are expected to plunge as fast as ratings for the new “Knight Rider,” says David Colker for The LA Times.

Analyst Riddhi Patel of ISupply forecasts that prices of 47-inch liquid crystal display models will go as low as $800, 42-inch plasma sets to $500 and 32-inch LCDs to $400. So, lets go shopping, and boost some retail ETFs in the meantime:

• SPDR S&P Retail (XRT), down 42.5% year-to-date

• Vanguard Consumer Discretionary (VCR), down 40% year-to-date

The key interest rate remained unchanged at 2%, reports Martin Crutsinger for the Associated Press. The benchmark prime lending rate will also stay at 5%, its lowest level since 2004.

Chairman Ben Bernanke said tight credit conditions, high energy prices and the continued contraction in housing will continue to weigh on U.S. economic growth.

Many economists believe that the rate will remain unchanged for the rest of the year.

There was other good news (at least, if you’re not holding oil futures) for the market: oil dropped as low as $118 a barrel. That’s its lowest point since early May. Crude is now nearly 20% off its all-time trading high of $147.27 hit on July 11.

The service sector contracted in July, as well, but it was less than expected. New orders fell as prices climbed, putting a crimp on growth for retailers, truckers and insurers, reports Ellen Simon for the Associated Press.

The reading was 49.5, up from 48.2 in June. Economists were predicting a reading of 49. A number below 50 signals contraction, while above 50 signals growth.

Some ETFs that could be affected by contraction in the service sector include:

• PowerShares Dynamic Insurance Portfolio (PIC), down 8.5% year-to-date
• iShares Dow Jones U.S. Insurance Index Fund (IAK), down 25.1% year-to-date
• Vanguard Consumer Discretionary (VCR), down 15% year-to-date
• SPDR S&P Retail (XRT), down 11.1% year-to-date