Financials, health and consumer discretionary are neck-and-neck this year, here’s the one to buy now

Three sectors have seen the same amount of gains this year, but one will come out on top, according to one technician.

Financials, health care and consumer discretionary sectors have rallied about 21 percent this year.

Piper Jaffray's Craig Johnson says that from a technical standpoint, financials are looking the best.

"If I have to pick one going into next year, I would pick the [financials ETF XLF]," he said Thursday on CNBC's "Trading Nation." "We just broke out of a 12-month consolidation range, and it looks like we're going to have more room for that particular index to run."

Strategist Mark Tepper also believes that banks are the best bet of the three. The CEO of Strategic Wealth Partners said that given tax reform and a possible continued rise in interest rates, banks are in the best position to benefit from both.

"Financials typically have very high effective tax rates that are obviously going to be lower with the tax bill," he said on "Trading Nation." "You throw in an increase in infrastructure spending and that should boost consumer and industrial loans, which have been lagging over the last several years."

"And then obviously if the yield curve begins to steepen, that's going to be a tailwind for the net interest margin as well, so we like the financials," Tepper added.

Financials actually began the year as one of the most beaten-down sectors of the market, trailing other big sectors like tech. But there has steadily been a rotation out of growth stocks like big tech and into financials and industrials, in particular, Tepper noted.


Trades to Watch

Trader Bios


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

Read more