Fisher Investments on Consumer Staples: Staples' Distant Cousin—Consumer Discretionary

Fisher Investments finds Consumer Staples and Consumer Discretionary are a little like cousins—part of the same general family (consumer oriented), but not much in common beyond that.

Consumer Discretionary firms include automobile manufacturers like General Motors, apparel stores like Gap, national restaurant chains like the Cheesecake Factory, and large entertainment firms like Disney. Fisher Investments believes the primary difference between the two sectors is Staples firms produce goods deemed as necessities (soap, cereal, bottled water), while Discretionary firms produce goods deemed as non-necessities (cars, clothing, laptops). This difference can be examined more critically by comparing them in terms of elasticity.

Elasticity is a measure of one variable's sensitivity to a change in another variable. The term references changes in demand relative to changes in price or income. Fisher Investments believes the concept of elasticity is core to understanding what makes the Consumer Staples sector tick.