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A wave of calm is about to wash over stocks, and Credit Suisse has a way to profit

Fundamentals to trump geopolitics in return to calmer trading: Credit Suisse

Just as investors have grown accustomed to bigger market swings, one strategist says we should return to calmer trading in the back half of 2018.

Jonathan Golub, U.S. equity strategist at Credit Suisse, expects a situation reminiscent of 2017, one of the smoothest periods of trading in Wall Street history. He anticipates this even as President Donald Trump lobs geopolitical curveballs at markets such as trade tariffs against some of the nation's closest allies.

"We're kind of trained to think that volatility is driven by news flow, and if that were the case then 2017 would have been a year of tons of volatility with Trump as president," Golub told CNBC's "Trading Nation" on Monday. "The reality is the most important thing is the business cycle and the economics."

For example, as Trump has antagonized G-7 members over trade, the VIX volatility index has plummeted more than 20 percent to trade at levels not seen since January. Volatility had picked up during wild sell-offs in February and March, even hitting its highest level since mid-2015 on Feb. 6, before easing again in June.

Volatility should be muted, as it was in 2017, for the rest of the year as investors favor a focus on fundamentals, says Golub.

"Right now the likelihood of recession between now and anytime, let's say, between late 2019 or even much later is probably low," said Golub. "The business cycle is going to extend itself. We're not looking at a recession. The economic data is ticking up, getting stronger, not weaker. And all of those things, no pun intended, they trump the geopolitics."

Earnings growth should continue to drive markets, according to Golub. He recently upped his profit estimates to $158 a share from $155 for 2018. His updated estimates represent 19 percent earnings growth for the S&P 500.

By sector, Golub says he has the greatest conviction in the technology space, a group already leading markets for the year.

"Tech I think is just the absolute most attractive group even after it continues to run up. The earnings story there is terrific. It's incrementally more expensive than the market but for a ton more earnings," said Golub. "I also like discretionary and the banks but nowhere near as much as I like tech."

The tech sector is up more than 13 percent for the year and the best performer on the S&P 500. Consumer discretionary is the S&P 500's second-best sector with a nearly 12 percent gain. Financials are flat.

Credit Suisse’s Golub says we’re set to return to the calm waters of 2017