Wall Street and the banks are back, but investors should be careful about sky-high expectations of regulatory rollbacks, Goldman Sachs Chief Strategy Officer Stephen Scherr said Tuesday.
Scherr, who also serves as CEO of Goldman Sachs Bank USA, said on CNBC's "Fast Money" that the tone of Tuesday's Goldman Sachs Financial Services Conference was upbeat and optimistic, relative to the last several years. However, the executives in attendance were cautious in terms of how much deregulation the banks would see from the Trump administration.
"We need to be a bit guarded in terms of just how much change we'll see and the pace of that change," Scherr said. "But it's very clear the market has a high expectation of what regulatory change may bring."
Investors and banks are optimistic about the direction that the economy will take, he said. He described an expectation held by the market for the banks to see a positive turn.
Regarding the number of Goldman executives who have recently left the company, and the possibility that COO Gary Cohn may leave in the near future for a Trump Cabinet position, Scherr said that leadership changes at the top of the firm would present opportunities for others to step up. He emphasized that Goldman has a "deep bench" and was confident that the firm would carry on.
The rumors of Cohn, 56, potentially leaving Goldman for a Trump Cabinet position, came after all remaining partners to carry the coveted title of Vice Chairman left, or announced plans to leave the firm. Most recently Michael Sherwood and Mark Schwartz who were named Vice Chair in February 2008 and June 2012, respectively, announced their departures.
If Cohn did decide to leave Goldman, his dual titles of President and COO would likely be split—Scherr, who has been with Goldman since 1993 and was recently put in charge of Goldman's push into consumer banking, is considered to be one of the few on the short list to potentially fill one of those roles.
When asked in an exclusive interview with CNBC's Wilfred Frost if Goldman's CEO, Lloyd Blankfein, was trying to consolidate power in the C-Suite, Scherr said he wouldn't exactly conclude the story in that way.
"There's been enormous stability for a long, long time in Goldman among the upper ranks of the firm and I think what you're seeing in the context of some of the people moving on, they have long tenure at the firm, and I think they viewed it just as a moment in time to go out and pursue other things," Scherr said.
On Cohn specifically, Scherr, 52, added "Gary, is and has been, an enormously positive force inside the firm, and I think the opportunity may well be presenting itself. I don't know the details, I read it as you do in the paper, but the opportunity may be there for Gary to move into government and I have every expectation he would be as positive a contributor there, as he's been at Goldman," he said.