Global equity markets are off to a bad start to 2016 largely because oil's dramatic fall is confusing investors, Goldman Sachs President and COO Gary Cohn said Thursday.

"What I think the confusing part of the oil market is, everyone's relating the sell-off in oil to be an economic slowdown," Cohn told CNBC's "Squawk Box" at the World Economic Forum in Davos, Switzerland. "I don't believe the sell-off in oil is reflective of an economic slowdown."

US oil prices have dropped over 20 percent in 2016, including their worst settlement since May 2003 on Wednesday.

"We're not seeing a demand slowdown in oil," Cohn said. "What we're seeing is a massive oversupply of oil. So we're now having to price oil at such a level that we can actually price in all available on-land storage, and then we'll move to floating storage."

US equities have fallen into correction territory this year — down at least 10 percent from their 52-week highs — as concerns over growth in China have also weighed.

Cohn said China's economy has slowed down, but it is also shifting to a consumer discretionary economy.

"You can't predict discretionary spending the way you can predict a government coming in and spending money in China," he said. "That transition is working. We saw a 10 percent increase in demand for coffee and gasoline in China last year. ... Now, the consumer can't drive the economy at 10 percent. The consumer can probably drive the economy at around 5 to 6 percent, and we're trying to regauge this 5-to-6 percent number."

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