The stock market is "pretty savvy" about discounting the likelihood of major events, such as whether pro-growth policy proposals from President-elect Donald Trump will be implemented, the co-head of investment banking at Goldman Sachs told CNBC on Thursday.
Before Election Day, policy risks out of Washington to the economy were weighted to downside, Goldman's John Waldron said on CNBC's "Squawk on the Street."
But since Trump won, and Republicans also kept both the House and the Senate, he said: "We're seeing more of those 'animal spirits' come back into the marketplace."
Those "animal spirits," or emotional feelings of optimism, have pushed the stock market to record high after record high, with the Dow Jones industrial average about 60 points shy of the 20,000 level around midday Thursday on Wall Street.
"If we get a tax reform deal, almost regardless of how the rates get set one way or another, it's a significant positive," Waldron said. "Broadly from a sentiment standpoint, the tax reform bill looks like it may happen with reasonable certainty."
Addressing the departure of Goldman COO Gary Cohn to be chairman of Trump's National Economic Council, Waldron said: "I expect that most of [Cohn's] focus will be on thinking about policy that can really help growth in the United States, and really driving more job creation and more opportunity for the broader base of the American population."
Waldron said he also expects Cohn to play major roles in crafting tax reform, including a reduction in corporate rates, as well as trade and energy policy.
Against the backdrop of Trump's business-friendly proposals, CEOs and boards are becoming "a bit more offensive minded," Waldron said, which should fuel mergers and acquisitions and initial public offerings in 2017, following a rather weak year for each.
Goldman has been an advisor on several big deals in 2016, including Syngenta on the $43 billion deal to sell to ChemChina, Baker Hughes on its merger with General Electric's oil and gas business, and Qualcomm on its $38 billion deal to buy NXP Semiconductors.
"The forces of consolidation in many of these industries are inexorable," Waldron said, but going forward M&A activity should take on a less defensive tone, which has been a major theme since the 2008 financial crisis with many companies unable to grow organically.
The IPO market, which is also under Waldron's purview, should also pick up next year, he predicted.
Goldman advised on the market debut of Apollo Global Management–backed insurer Athene Holding in December.
"We've got Snap coming. We've got a series of transactions on backlog," said Waldron, referring to Snap, the parent company of Snapchat, which is expected to be a blockbuster IPO in 2017.
Shares of Goldman Sachs have soared more than 30 percent since Election Day, compared to the advance over the same time period of about 6 percent on the based on midday trading on Thursday.