The reflation trade is a bet that inflation is set to pick up and has seen portfolio managers rotate into value stocks, expecting upside should the global economy continue growing.

But in the past few months US bond yields have slid 30 basis points since their March highs, iron ore has slumped 30 per cent and equity markets around the world have pulled back 2-5 per cent.

"However, we forecast reflation to return," says Mr Tevfik, Australian equity strategist at Credit Suisse.

"The global macro backdrop remains buoyant with solid growth in China and a continued recovery in the US. In Australia, we face the looming headwind of a housing downturn but do not think this will be as sharp a drag on corporate earnings as many fear."

Foreign demand for housing, a modestly improving labour market and the recent boost in Australia's terms of trade bode well for a continued expansion in earnings and Mr Tevfik points to value stocks as the best corner of the market to scoop up the benefits.

These Australian fundamentals, combined with the promised tax plan from the United States Trump administration, has given investors new hope that inflation will pick up and stimulate equities further still.

In the coming quarter, Credit Suisse expects rising earnings-per-share, rising index prices and falling price-to-earnings ratios to drive the earnings expansion in local equities.

While there is some discussion surrounding the compression between "expensive" and "cheap" stocks, Mr Tevfik expects further to go.

When the earnings expansion cycle began last September, commodities dominated the low price-to-book sectors while healthcare, industrials and technology were among the "high" group.

"Our work suggests it is too early to take profits on the value-trade despite the considerable valuation compression over the last six-nine months," says Mr Tevfik.

"While there could be plenty of reason to suggest 'it's different this time' the fact is that high price-to-book sectors trade at double the premium they usually do when compared to low price-to-book sectors. And previous earnings expansions have been times when the valuation premium falls to below the long-term average of 30 per cent."

Credit Suisse has scooped profits from its Crown holding, but points to the likes of BHP, Bluescope, Lend Lease and Qantas as appropriate value stocks.

The bank remains wary of defensive plays, such as consumer staples, healthcare, telecoms, utilities, the REITs and the three listed infrastructure companies.

But overall the Credit Suisse team is constructive on Australian equities and expects the ASX200 to burst through the 6000 point mark by the end of 2017.