The surge in global liquidity now underway is likely to provide further fuel to the next major asset bubble, which is likely to already be in the process of forming. Potential candidates are gold and commodity prices, emerging markets and resources shares.

But the absence of obvious overvaluation suggests we are still in the foothills of the next bubble, which likely has years to run, providing plenty of opportunities for investors in these assets in the interim.

Global growth is already north of 4%, with emerging economies in excess of 6% and accelerating. There is no double dip in the US. China has seen its growth bottom at around 8% with a reacceleration now underway. On top of this, we now have the money printing of QE2. This is all fuelling an explosive environment for global liquidity and commodity prices. The global economy is still in the early recovery stage and yet already the supply/demand equations for iron ore, coal and copper are very tight with little new supply before 2013.

We believe the conditions have been created for a strong ongoing bull market for resources. Despite share price gains thus far, valuations remain reasonable as they are chasing cumulative EPSg over FY11 and FY12 of over 75%. That is why prospective cash flow multiples for most of the sector remain below 7x .....

QE2 will amplify the already surging US and global corporate debt market issuance levels. We believe this will also prompt a major surge in global M&A as corporates use cheap debt and surplus low yielding cash to build growth. This in turn should boost share prices and IPO activity.