"Every time I get accustomed to low volatility, like we were towards the end of the Greenspan era, and we think we have all the levers under the control ... something erupts to remind us that the idea that anybody is in control of everything is hubris," Blankfein told CNBC's "Power Lunch" from the sidelines of the company's director symposium in Chicago.
"I don't know what brings us out of the doldrums, but I do know this is not a normal resting state," he said.
The CBOE Volatility Index, widely considered the best gauge of fear in the market hit its lowest intraday level since December 2006 on Tuesday.
Equities have been on a tear lately. Earlier on Tuesday, the and the Nasdaq composite set new all-time highs.
That said, stocks have traded in a narrow range for most of 2017. The S&P has only posted moves greater than 1 percent twice this year.
"The low volatility may be a bit of a bubble of confidence, but we won't know until we know," Blankfein said. "My own expectation, which I never rely on ... is that we're muddling through. A lot can go wrong, but the base case is that things are going right," he said.
Nevertheless, Blankfein believes the banking sector is equipped to deal with any trouble ahead, saying U.S. banks are overcapitalized.
Banks have been some of the best-performing stocks over the past year, with the SPDR S&P Bank ETF (KBE) rising 38 percent in that period.
Also watch: Blankfein: US banks are overcapitalized now