When the news first broke out that Goldman Sachs was being sued by the SEC, I couldn’t understand the market reaction. All assets, except the dollar, Treasuries, and yen suffered a correction. So I started asking myself what was the big deal. Could this news be a “trend changer”? Could this news really lead to a major market correction?

I believe as long as earnings and overall economic data continue to be positive, as it has been for the past few weeks, this Goldman news won’t be enough to change the overall sentiment.

In the long-term, the SEC charges against Goldman add to the risk of regulation. But that shouldn’t be any surprise to the market. There’s no question that we will enter a new phase of more regulation of the financial sector. Politicians know they will get some votes with a financial reform. But that is already priced in the market.

The most disturbing fact of all of this is that the government is using the SEC to hurt the banking sector in order to gain votes. And if the coming financial reform is designed with the purpose of shrinking Wall Street, then the market has real reasons to be concerned.

The market should be the one deciding the right size of the financial industry, not the government. This kind of political risk can really mess up the global recovery. But for now, this SEC lawsuit is nothing more than a public show to promote the government.

Besides that, this Goldman Sachs law suit will not be resolved in the short-term. If the SEC is able to prove its case in court, of course the ramifications for the other banks will be tremendous. But it won’t be an easy case for the SEC. Even the SEC decision to sue the company came after a split vote of 3 to 2.

The pullback caused by this Goldman news should be used to take new positions in emerging market currencies that have strong fundamentals and high yields, such as the Mexican peso and Brazilian real.