Cash — one of the last vestiges of the analog era — is steadily going out of style. This broad trend only helps credit card companies with mass appeal, such as Visa (NYSE:V). Although you’ll often hear personal finance gurus urging their listeners to cut up their plastic, let’s be real: Americans love debt-based consumerism. That simple fact should lift Visa stock northward on a longer-term basis.

Adding to the bullish case, this scenario is playing out exactly as I stated. On a year-to-date basis, V stock is up nearly 28%. Credit card rival Mastercard (NYSE:MA) is enjoying a similar burst in sentiment, gaining a massive 38% year-to-date. Compare these performances to the benchmark S&P 500 index, which is up only 14% YTD after suffering volatility since May.

And what is the source of this volatility? Just turn on the TV to find out. A few weeks back, everybody was scrambling to decipher underlying signals within the deteriorating complex of U.S.-China relations. Now, President Trump has his eyes focused on Mexico, threatening painful tariffs unless they control migrant inflows. But while all this is going on, the Visa stock price remains elevated.

Like our own Ian Bezek stated in October 2017, V stock is surprisingly recession-resistant. Visa doesn’t assume credit risk in the way that a mortgage lender might.

Plus, the world community is undergoing a transition to financial digitalization. One of physical cash’s final holdouts, Japan, is slowly but steadily shifting toward a cashless society. As a western ally and the world’s third-biggest economy, converting Japan is huge for companies like Square (NYSE:SQ). Through natural synergies, you can also expect a swing higher in the Visa stock price.

Yet I’m cautious, and here’s why:

Visa Stock Has Serious Vulnerabilities

The last time I wrote about V stock, I compared the underlying company to Apple (NASDAQ:AAPL). Making headlines earlier this year, Apple announced its foray into the plastic industry.

However, I felt that Visa’s broad base, and its decades of expertise in the arena gave it the advantage. I’m still sticking to that narrative.

But since writing that piece, the U.S. is on the verge of entering a two-front trade war. Going toe-to-toe with China is bad enough. Simultaneously antagonizing Mexico is a very risky political move for the Trump administration. Obviously, if the situation worsens, it will threaten several jobs.

And that’s why with this new information, I’m hesitant on Visa stock. Earlier, Bezek mentioned that company shares mitigated losses better in the 2008 fallout relative to many other stocks. That suggests the American consumer is much more resilient than we give it credit for.

But another scenario is that consumers used whatever tools at their disposal to keep the rusted train going. Consumer debt statistics indicate that, contrary to the “recovery” narrative, most Americans are deeply troubled. People with credit cards average over $5,800 in debt.

Some states are much worse. For instance, Alaska has the most average credit card debt at $8,500 per cardholder. Iowa features the lowest, but still maintains a staggering $5,155 of plastic debt.

All you need to do when considering the risk to the Visa stock price is read between the lines. People have no reason to hold such mind-boggling balances in their high-interest rate cards other than cash flow purposes. In order to make ends meet, Americans individually kick the can down the road.

V stock has been rising because we’ve had plenty of road to cover. But these new geopolitical headwinds are too ominous to ignore.

Excessive Bad Loans Cloud V Stock

Admittedly, our spiraling relations with foreign economic partners got me to question the true state of our own economy. After all, President Trump won because he tapped into the actual fears affecting voters.

In other words, Trump called Obama-era data “fake news.” Millions believed him.

Now, Trump as President is changing his tune. Rather than fake news, positive labor reports and consumer sentiment represent confirmation that his policies work. But the reality is that Trump was probably right the first time. Certainly, rising consumer debt levels support the pessimistic narrative.

What bothers me more is that this narrative has other confirming indicators. For instance, big banks like JPMorgan Chase (NYSE:JPM) are only gaining due to issues involving monetary policy. However, they are not generating revenue growth from activities like lending or consulting.

Put differently, Americans are not taking on good debt. By that, I mean debt for the purpose of starting new businesses or ventures. Instead, we’re seeing an increase in bad debt, or liabilities associated with purchasing junk.

What I’m talking about probably won’t impact the Visa stock price immediately. But considering that it’s so elevated right now, I’d stay on the sidelines with the powder keg dry.

As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.