Chief global equity strategist, Merrill Lynch
Chinese property stocks are the global leading indicator right now. The Shanghai Composite Property Index, made up of 33 Chinese real estate and construction companies, was among the first to tank in 2007 and the first to start rallying back in November 2008.
Why do I like this indicator? Because China stimulates its economy through real estate. From a global perspective, if China is building, commodities will go up. Since these companies are sensitive to prices, they'll be among the first to detect inflation.
Currently, these stocks aren't as unambiguously positive as they were three months ago. If they start to decline, it would indicate that investors expect the Chinese to tighten monetary policy. It was the first to ease interest rates, and the most aggressive. They got it right, and their stock market was the first to start to recover. When China raises rates, that will have a ripple effect through global equity markets.