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Goldman's Cohn: How markets are faring in a year of massive uncertainty

Cohn: Trump's win was not that shocking

The election has capped a year of massive uncertainty — and it's left investors unsure of what to do, one Goldman Sachs veteran said.

"Think where we started the year. We started the year with a Fed increase, the Dow down 10 percent," Gary Cohn, Goldman Sachs president and chief operating officer, told CNBC's "Fast Money: Halftime Report" on Tuesday. "We saw the Dow rally back. We talked about China growth, oil prices going down, we had Brexit, we had the election."

With investors constantly migrating their assets to areas where they perceive more clarity, markets are dying for sustainability and predictability, Cohn said. And markets tend to overreact to everything, he said.

Gary Cohn, Goldman Sachs
Ian Waldie | Bloomberg | Getty Images

Cohn's Goldman colleague, CEO Lloyd Blankfein, weighed in on President-elect Donald Trump's White House win last week at The New York Times' DealBook Conference, calling Trump's policies "market supportive." Stocks posted sharp gains since the election, with the S&P and Dow rising 2.1 percent and 3.29 percent, respectively, even as tech stocks languished.

"In an unclear environment, people did not want to own banks," Cohn said. "People are starting to migrate toward those asset classes that they think may benefit.... banks are one of those. We're starting to see some rotation out of technology names where people were comfortable owning them, into bank names, into drug names, into industrial names."

Cohn, speaking from the Global Financial Leadership Conference in Naples, Floriday, said he anticipated the election results, an his immediate reaction was to buy the market and do the opposite of whatever markets did overnight.

"We're all giving president Trump, and his transition team, the benefit of the doubt," Cohn said. "We're waiting to see what happens, and as we get more and more clarity, the markets will react. "

Trump has said he would overhaul financial regulations like Dodd-Frank and Glass-Steagall. Cohn said that it's a matter of striking a balance between feeding job growth and protecting America's reputation as a financial leader.

"As central banks start to flood the market with liquidity, we need to be able to transmit that into main street — to entrepreneurs... to small and medium-sized companies," Cohn said. "I do think that part of the regulation we've gone through has inhibited our ability to transmit that capital....On the other hand, remember U.S. banks today are the strongest banks in the world.... that's a huge competitive advantage for U.S. banks and I don't want to lose that."

Though the market is still waiting to see what Trump will do, he has also taken a hard line against Federal Reserve chair Janet Yellen.

While Cohn said he thinks a December interest rate increase is "a foregone conclusion," he's concerned it might make imported goods cheaper than what is available in the U.S. If foreign cars become cheaper than American cars, for instance, it could hamper job creation, he said.

"I am concerned [about] how much U.S. rates can dislocate from the rest of the world, and I think that's a big issue," Cohn said. "We are part of a global monetary system today. And we've got many other major central banks around the world still with a zero interest rate policy, and quantitative easing. If we dislocate from other central banks around the world, we will see that in the value of the dollar. The question, to me, is, 'How strong can the dollar be until that starts having unintended consequences in the U.S. economy?"

— CNBC's Jeff Cox and Fred Imbert contributed to this report.