A growing gap between two key consumer confidence measures is flashing a warning sign for the U.S. economy—and the stock market. The unusually wide spread between the Conference Board’s Consumer Confidence Index (CCI) and the University of Michigan’s Consumer Sentiment Index (UMI) has historically signaled an increased risk of recession. Right now, that spread is in the top 10% of its historical range, a level associated with a tripled chance of recession within 12 months.
The disconnect suggests Americans are generally optimistic about the economy—but more worried about their personal financial situations. This divergence has preceded weaker performance in stocks, particularly over a multi-year horizon. While not a short-term market timer, this indicator adds to mounting evidence that investors may be underestimating future risks.