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Krystine Lumanta is a journalist with InvestorDaily, a Sterling publication.

Elevated levels of policy uncertainty from offshore are hurting the Australian market, leading to a marked impact on underlying economic activity, according to Tyndall AM.

While the bulk of the policy uncertainty was offshore, Australia's economic fortunes were tied closely to China, in addition to the equity market's high correlation to the United States, Tyndall AM senior research analyst and portfolio manager Tim Johnston said.

"What happens offshore certainly impacts here, and if the policy settings do change or if policy outcomes are different from expectations, then there will be consequences," he said.

"Looking at the pricing of the United States market on a price-to-earnings basis versus its historic average it looks modestly expensive - about 7 per cent more expensive. That's signalling that we're either in a period of above average growth or a period of below average risk.

"It seems we're in a state of flux in a lot of ways. We are at a very elevated level of policy uncertainty and we can see that impacting economic outcomes.

"Policy uncertainty is seemingly having a discernible impact on underlying economic activity [but] I'm not certain that it's actually being priced by the markets."

There was also a tremendous amount of uncertainty around where policy settings end up, particularly with the imminent United States presidential elections, should a change in government occur, Johnston said.

"If you look at the basic philosophies, it's quite clear that the Democrats want tax increases and the Republicans want spending cuts but beyond that, there's been very little detail in terms of the economic policies that each candidate intends to pursue - it's been very light on detail," he said.

"How will the fiscal cliff be addressed after the election?"

In addition, the longevity of quantitative easing (QE) as standard policy was questionable as Republican presidential candidate Mitt Romney had expressed he was not a fan, Johnston said.

"The consequences of QE being removed [would be] rampant bond markets. I believe that QE and the loose monetary policy means the liquidity that's out there has been a prop under equity markets and to some degree, a prop under some commodity markets, certainly under gold.

"With QE off the table, that unwinds."

Furthermore, the elimination of QE would probably be a major boost of the United States dollar, but the consequences of that outcome were also unknown, he said.