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Why investors should look past this week's inflation data, according to Credit Suisse's Golub

Why investors should look past this week's inflation data, according to Credit Suisse's Golub
Why investors should look past this week's inflation data: Credit Suisse's Golub

Another sell-off swept Wall Street on Tuesday.

The Dow Jones Industrial Average and S&P 500 tumbled, though pared back from the worst of the day's losses, in what Credit Suisse's chief U.S. equity strategist, Jonathan Golub, sees as an anticipatory move ahead of key inflation data this week.

Consumer prices data for April is scheduled for release Wednesday morning and producer prices on Thursday.

"It is making a lot of people uncomfortable, and I think that is ultimately what is giving the market some near-term indigestion," Golub told CNBC's "Trading Nation" on Tuesday. "Everyone who is involved in markets knows that the inflation data is running hot ... The debate right now: Is this temporary or is this something stickier? And we won't know for a long time, but that's really where the conversation is going."

The Federal Reserve has said it sees inflation moving higher, though it continues to view it as "transitory." March producer prices data recorded its biggest annual increase in more than nine years, while consumer prices rose by the most since August 2018.  

But, even with inflation spooking markets, Golub says, there's a lot for investors to like in this environment.

"I don't think we need to hide," said Golub. "The second-quarter GDP is going to be extraordinarily strong. The expectations are for something like 12% year-over-year GDP growth in the second year. Earnings expectations are for 57% EPS growth in the second quarter."

So far this reporting season, S&P 500 companies have posted 50% earnings growth, the strongest quarter of growth since the first quarter of 2010. More than four-fifths of the S&P 500 has already released results.

"It comes with a cost, and that cost is inflation. And the market, I think, will be able to handle it perfectly fine, so we are having a little bit of a hiccup — that's all it is, it's a hiccup," said Golub. "You want to lean in. Where would I do that? Cyclical stocks."

Cyclical sectors, typically those that produce goods in high demand in an economic upturn such as materials and industrials, have outperformed in the past month. Materials is the best-performing S&P 500 sector over that stretch, rising nearly 10%.