Change Of Sentiment In Goldman Sachs And J.P. Morgan (JPM, GS)

It seems like only yesterday that market participants were raving about high quality financial names like Goldman Sachs (NYSE: GS) and J.P. Morgan (NYSE: JPM). The last month, however, has been brutal on these two stocks. Much of this stems from the proposed legislation to bar banks from operating, or investing in, proprietary trading divisions, hedge funds, and private equity. Goldman Sachs (GS) has fallen nearly 13% in the last month to $151.07. J.P. Morgan (JPM) has shed 10% during the same time period.

The legislative risk to these companies is real, but I think that the sell off is also linked to growing populist anger over Wall Street compensation and lingering animosity about the bailouts. Although these names are starting to look like compelling long term investments at current valuations, there are just too many uncertainties to step in and start buying right now. Prudent investors will want to try to avoid everything but the most conservative financial stocks for the time being, but traders willing to take some risk may want to look at GS and JPM once they are comfortable the sell off has stopped.