These stocks will soon lead the market: Traders

After a tumultuous stock selloff that put all major U.S. indexes in the red for the year, some traders say that the most battered sectors of the market could lead the way on a bounce back.

Larry McDonald, managing director at Societe Generale, said monetary policy action from the Federal Reserve could drive some of this year's underperforming sectors higher by creating a weaker dollar.

"The surprise in the third and fourth quarter could very easily be commodities, names that have been really beaten up that would benefit from a weaker dollar," McDonald said. "I think the Fed has to get that dollar contained to put out this global fire."

The U.S. dollar has risen almost 7 percent year to date. Meanwhile, commodities such as crude oil, gold and silver have fallen to multiyear lows this summer.

As a result of the commodities collapse, S&P 500 sectors such as energy, utilities and materials have tumbled 19.5, 12.7 and 12 percent year to date, respectively.

But investors could soon be pouring money back into these sectors, agreed David Seaburg of Cowen & Co., specifically energy stocks.

"There's a lot of pent-up demand, a lot of money sitting on the sidelines, waiting to gravitate into energy," Seaburg said. "It's probably not til much later in the year, but when that occurs it's going to be fierce."

Seaburg also pointed to large technology company names that have previously led the market such as Facebook, Amazon and Google, as well as large-cap biotechnology stocks.

"I think you're still going to have that group of high-growth names that lead the market continue to outperform," he said.

Shares of Facebook, Amazon and Google have soared this year, up 13, 20 and 62 percent, respectively. The iShares Nasdaq Biotechnology ETF (IBB) which tracks biotech stocks is up 11 percent year to date.

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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

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