The year's hottest sector shows no signs of slowing

Consumer discretionary stocks hit a new all-time high on Friday, closing out the week with gains of almost 2 percent. The investor favorite has outperformed every other S&P 500 sector by a wide stretch, rising more than 12 percent year to date.

In comparison, the S&P 500 is up 1 percent, and the next-best performer is information technology, which is up 6 percent year to date.

Within the sector, the Internet and catalog retail industry has soared, thanks to popular stocks such as Netflix, Amazon and Expedia. But some of the biggest drags on the broader sector also come from the retail space, with names like Fossil, Michael Kors, Ralph Lauren and Gap among the worst performers year to date.

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"Consumer discretionary has been a huge home run for investors," Eddy Elfenbein, editor of the Crossing Wall Street blog said Friday on CNBC's "Power Lunch."

According to Elfenbein, as well as technical analyst John Kosar of Asbury Research, the sector looks as if it will continue its winning streak into the next year.

Kosar noted that total net assets in XLY, the ETF that tracks consumer discretionary stocks, have seen a sharp uptick since the end of September. However, he said to watch assets for signs of too much profit-taking and a subsequent pullback.

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"As long as those assets continue to expand, this is going to go higher, and it could go significantly higher between now and the end of the year," he said Friday. "I still really like the space, but you really need to watch those assets because this is where a lot of back and forth is taking place."

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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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