Despite a solid performance over the past two years, the Australian share market has lagged behind the global rally and that trend is expected to continue.

Citi remains overweight the US and, more recently, Europe, while maintaining an underweight position against Australia due to its reliance on resources and concerns about future growth prospects.

Speaking to Ausbiz on Tuesday, Citi strategist Beata Manti elaborated on these concerns: “For now, we are overweight in the US and Europe, which we have just upgraded. Australia and Japan are underweight.

She pointed to a shift in China's stimulus strategy as a key factor influencing Australia's outlook.

“Australia is a cyclical market, but it is highly resource-driven. We worry that the flow of news from China – the stimulus it will provide – will not be as infrastructure-driven as before. Therefore, you don't need as many core resources to manage the incentive or benefit from the incentive.

Manthey also highlighted Australia's high valuations and weak growth prospects compared to other cyclical markets.

“Australia is a tough comparison to other cyclical markets. It is very expensive and growth prospects due to poor raw materials are not very strong. So it underperforms other more cyclical markets in our allocation model,” she said.

On Tuesday, the S&P/ASX 200 jumped above 8,300 to hit a new record high, led by a strong performance in mining heavyweights and banking stocks. Australian shares mirrored gains on Wall Street, where the Dow and S&P 500 hit new highs.

However, investors are keeping a close eye on the economic outlook in China, Australia's biggest trading partner, as they await further details on Beijing's recently announced fiscal stimulus plan, with announcements so far lacking details on its scale.

Speaking of ABC News at the weekend AMP's Shane Oliver said that until China "falls off a cliff" it does not pose a "major threat to Australia".

Economists previously noted the need for more fiscal stimulus after the People's Bank of China (PBOC) announced a monetary stimulus package last month that included cuts in reserve requirement ratios and interest rates.

What followed were two disappointing announcements, leaving the world waiting for clarity on the cost of China's fiscal stimulus, with details expected to emerge when China's legislature convenes in the coming weeks.

In the latest announcement, Finance Minister Lan Fo'an pledged to issue more debt to support the struggling property market and recapitalize banks; however, the measures do not signal an urgent fight against deflation and an increase in consumer spending, both of which are seen as crucial to China's economic recovery.

Oliver stressed that while policies may provide China with a cyclical boost to growth, without structural reform, that growth is "likely to stall."

On Friday, in his latest market outlook, which preceded the latest China announcement and global market gains, Oliver said the combination of stretched valuations, the still high risk of recession in the US and Australia, the widening of the war in the Middle East to potentially affect oil supplies, and the US election means "the risk of another correction and continued bouts of volatility is high."

"In the six to 12 months ahead, however, stocks are likely to rise on the back of success in reducing global inflation, central bank interest rate cuts - with the RBA edging closer to joining - and China stepping up policy stimulus." October can often see high levels of volatility in the equity market, but we are also entering a positive period of the year for equities from a seasonal perspective,” said the chief economist.