Here we go again. In what feels like a repeat from the end of 2018 for the stock market, trade wars are front and center again in the minds of investors. The market is down about 5% from recent highs, and people are wondering if we’ll experience a similar 20% decline like we saw late last year or worse.

This time we have added Mexico to the tariff list. This could indirectly affect the NAFTA deal involving Canada. In a surprise move that many within his cabinet and party opposed, President Trump has decided to use economic sanctions to achieve immigration reform with Mexico. This opens up Pandora’s box on the use of tariffs. All of this is coming at a time when many of the major world economies are experiencing a slowdown in growth.

The tariffs against Mexico have come at a sensitive time as investor’s belief in a deal with China have been waffling. Recent banter shows there is still much work to be done to agree upon a new deal. There remains only faint optimism that a deal will eventually get worked out, but both parties seem entrenched on opposing ideas surrounding intellectual property rights. Yesterday we at least heard language that they’ll start dialogue to address these differences.

What will this mean for the stock markets going forward? As always, it’s anyone’s guess, but I’ll try to breakdown the scenario as I see it.

We are currently experiencing the longest stock bull market in American history, and it may soon qualify for the longest economic expansion. While the element of consumer debt isn’t the elephant in the room this time for leading to a crisis, there is, however, ballooning record debt held by corporations. Couple this with the underfunding of state pensions, and a reckoning seems inevitable at some point.

The worry is that the current stock market gyrations along with the trade wars could tip the scale and cause the unwind. They aren’t problems in the public eye until they are, and it usually takes a recession and falling market to bring them into full view.

On the other hand, while growth has slowed, it is still growth. It may not take much to reaccelerate growth back to levels we saw in 2017 and early 2018. The Mexican president has said he hopes to work with the U.S. in a plan to forego economic tariffs. If we could get clarity and a deal with China, I believe we would see business prospects improve dramatically.

I don’t believe we are seeing the typical psychological signs of a market topping out. Investors have under-participated in the rally of 2019, and have been removing money from stock funds at a torrid pace most of the year. Many sentiment measures which reflect the mood of investors are reaching levels that are typically seen at major market bottoms. All this while the market is only down about 5% from recent highs.

That’s not to say that the market can’t top out with a sour mood, it just isn’t typical. Typically, there would be very large inflows of money into stocks, it would be heavily participated in, and the mood of investors is typically obnoxiously positive.

The situation is definitely delicate right now. I don’t think we have the recipe for a major market decline that happens suddenly and fast. Worst case I could see is a wildly gyrating market that is generally going to trend downward for a year or more. If I set fear aside about the debt situation and trade deals, I believe we have yet to see the final euphoria that is more typical of market tops.

(Past performance is no guarantee of future results. Advice is general in nature and not intended for specific situations.)

– Aaron Pickert is financial advisor, chief investment strategist at Stewardship Capital in Independence.