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Consumer discretionary stocks just hit an all-time high, and experts see more gains ahead

Key Points
  • The sector is now the second-best performing group in the S&P 500 this year, up over 20% and trailing only technology.
  • Amazon is the largest holding in the consumer discretionary ETF, making up 23% of the XLY.
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Experts on how to trade the consumer discretionary sector

Consumer discretionary stocks hit an all-time high on Monday, and they could continue to rise.

The sector is now the second-best performing group in the S&P 500 this year, up over 20% and trailing only technology. Dave Nadig of ETF.com says it's valued appropriately despite such a big runup.

"I don't think it's overvalued. I mean, we've seen some incredible earnings like McDonald's a few days ago, " Nadig said on Monday on CNBC's "ETF Edge." "Almost no matter how you want to play the consumer story, it's clear that consumers are actually more confident in this market than investors are."

Mary Ann Bartels of Bank of America echoes Nadig's positive sentiment about the sector. She said that "despite all the volatility and trade noise that we've had, consumer confidence has remained very high."

But while Bartels sees no threats for the sector, Nadig cautions that the emergence of tech names in the consumer discretionary ETF (XLY) could make things more volatile.

"We don't get the things like Facebook necessarily that we get in some of the more tech-y plays, but there is a lot of tech baked into what we see in consumer discretionary now," Nadig said. "So I wouldn't expect the sector to be immune from volatility at all."

In fact, Amazon is the largest holding in XLY, making up 23% of the ETF.