Hedge fund titan Marc Lasry speaking at the ICV Manhattan conference, saying the market is experiencing a "sugar high" that has generated a lot of excitement among investors.
The Trump-induced rally has resulted in a better than 8 percent gain in the Dow Industrials since the election.
But before you break out the champagne, Lasry says there are still questions as to whether this rally can continue. As we know, breakthrough moments can be unpredictable.
Lasry, who supported Hillary Clinton, is cautiously optimistic.
"The people [Trump] is putting in place … it will be a big experiment. All those business folks will be able to reduce regulation, increase GDP growth," he said in an interview Thursday with CNBC. "If it occurs, great. I don't know if that happens. … I hope it does. The early signs are positive, so let's wait and see."
The CEO of Avenue Capital Group, which has about $11 billion in assets under management, admitted that even though his firm saw Clinton winning, he didn't set up his portfolio that way.
"So I think we ended up having a huge benefit over the last month," he said.
Going into 2017, Lasry said the main metric to watch is headline growth.
"If you have tax cuts, a much larger deficit in a rising rate environment, that is not beneficial unless you have 3 or 4 percent GDP growth. So what you're going to have is inflation. Question is, what will happen with GDP growth? If it is 3 to 4 percent, that will be very positive," said Lasry.
President-elect Donald Trump's pro-business agenda has been cheered by investors and has been seen as the main driver behind stocks. Energy is currently the best performing sector in 2016 and has risen more than 23 percent.
Lasry said the market would have probably not rallied as much had Clinton won the presidency.
"I think the market would have gone up a little, but a lot of it was priced in," he added.
Most people thought — and you saw — when it looked like he [Trump] was going to win, the market was down about 800. What calmed the market quite a bit — you saw it as he gave his speech — things ended up calming and it looked like, OK, things would be positive, and since then that's been the consensus and that is why the market is up."
On the topic of banks, Lasry was optimistic, saying the prospect of deregulation opens the doors to much more activity and lending for financial firms.
But Lasry is more focused on the distressed opportunity — specifically in the energy sector. One name he mentioned, which he's mentioned before on CNBC, is Dynegy.
Beyond the U.S., Lasry, who has over two decades of experience in investing in distressed assets, is taking advantage of the political uncertainty in Europe, which doesn't seem to calming down anytime soon.
The most recent political shock coming out of Europe is the Italian referendum where the "no" vote prevailed, leading Prime Minister Matteo Renzi to resign and has cast a cloud of uncertainty around Italy's financial sector, which is under much distress.
"So when you have sort of what's going on in Italy, and people are nervous and people are worried. Ultimately what that does for what we are investing in, in a great company that's overlevered … it forces prices down. And that's the opportunity. And it's the same thing here."
Lasry went on to say that the more stable an environment, the less there's risk. But there's also less return. The more volatile an environment, the higher the returns.
"And the question is are you investing in companies, so what we would love to do, whether it's in Europe or it's in the United States…ultimately what you want is to invest in a great company that is over levered."
Full interview below.
