Bullish market signals, combined with a weakening economy, complicate investing decisions; however, I do have an exchange-traded fund (ETF) that you may want to consider. This fund tracks companies that have consumer products that people need in both good and bad economic times. It’s the Consumer Staples Select Sector SPDR (XLP).

Companies in the consumer staples sector primarily are involved in the development and production of consumer products that cover food and drug retailing, beverages, food products, tobacco, household products and personal products. The fund’s top ten holdings, as of August 3, were: Procter & Gamble (PG), 15.53%; Wal-Mart Stores (WMT), 9.58%; Philip Morris (PM), 8.69%; Coca-Cola Co. (KO), 6.85%; PepsiCo (PEP), 4.79%; Kraft Foods (KFT), 4.59%; CVS Caremark (CVS), 4.23%; Altria Group (MO), 4.14%; Colgate-Palmolive (CL), 3.76%; and Walgreen Co. (WAG), 2.68%. These are the best-known and most well-established consumer products companies in the world.

As you can see from the following chart, the fund has climbed decisively higher after hitting its July lows.

Unlike high-flying growth stocks that might make you feel like you’re on a roller-coaster ride, XLP tracks companies that tend to provide investors with fairly stable returns. The large size of the companies tracked by XLP does limit the prospects of the fund surging in value when the market turns bullish. However, the companies also should hold their share prices reasonably well during a market pullback.

The old adage of investing in companies that sell products that people want and need fits this fund perfectly. You typically will continue to use soap, shampoo and toothpaste, regardless of economic conditions. Likewise, you’ll continue to eat and drink to ensure you survive until better times are here.

In sum, XLP is a fairly conservative equity investment that gives you the chance for capital appreciation, but it’s one that is less prone to big drops than most other stock funds. If you like excitement, XLP may not give it to you. But if you want to stay invested in equities and still sleep at night, XLP may be just what you are looking for right now.

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