The market is entering a period of performance and policy vacuum, with the overall fluctuation and adjustment of the stock index. Thanks to the liquidity support of leveraged funds, thematic sectors such as the Northern Exchange and small-cap stocks have been active repeatedly, showing signs of returning to their highs.

Will this "bull" come back? Should we lay it out? If so, should we chase hot spots or look for other opportunities?

If we look at historical experience, it is essential to make plans at the end of the year and the beginning of the next. Around December, the market will usher in its traditional bullish period, which is what we often refer to as the "year-end and New Year rally."

The so-called year-end and New Year rally refers to the upward market trend that occurs from the end of the year to the beginning of the next. The core factor behind the emergence of this rally is the overall loose market liquidity, coupled with strong expectations from investors regarding subsequent economic policies and improvements in corporate earnings.

Looking at historical experience, over the past 16 years of market performance, the rally has started in the fourth quarter for 10 years. This year's year-end and New Year rally is particularly worth looking forward to:

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1. Sentiment: After the Q3 reports landed at the end of October, the market once again entered a performance vacuum period. The degree of corporate earnings recovery cannot be disproven in the short term, providing space for thematic interpretation and raising market risk appetite;

2. Policy: Since the end of September, a series of policy combinations have been intensified, involving reserve requirement ratio cuts, interest rate reductions, reduction of existing housing loans, creation of convenient tools to stabilize the stock market, and a total of 12 trillion yuan for debt resolution. The strength and breadth of these measures send a clear turning point signal;

3. Expectations: After a series of key policies take effect, the economy is expected to enter a mild recovery phase. On the other hand, the stabilization and recovery of real estate prices and corporate earnings will also repair residents' wealth. Looking ahead, the Politburo meeting in December and the Central Economic Work Conference, as well as the Two Sessions to be held in the first quarter of next year, will provide clearer guidance on economic work.

4. Capital: As of November 21, the A-share turnover has exceeded 1 trillion yuan for 37 consecutive trading days. In addition, the bullish capital represented by the financing balance remains at a high level of 1.83 trillion yuan. Both indicate that active capital is still in the market, and the rally will not end easily.

From the perspective of style interpretation, the market at the end of the year and the beginning of the next often shows a clear "value sets the stage, growth performs" characteristic. It is likely to rely on the rise of large-cap stocks to lift overall sentiment and valuation expectations, and then perform the elasticity stage of small-cap stocks.

From a configuration perspective, one can build an offensive and defensive "core-satellite" portfolio through specific types of ETFs or index funds outside the exchange.

The "core-satellite" strategy essentially divides the capital into "main + secondary" parts.

"Core" assets exist as the ballast stone of the portfolio. The goal is to strive for relatively stable long-term returns under controllable risks, leaning towards strategic long-term holdings, generally accounting for 60% or more of the portfolio.

"Satellite" assets play an "icing on the cake" and auxiliary configuration role. A small part of the investment will be in relatively high-risk, high-elasticity, and high-growth assets to seek higher returns, generally accounting for 40% or less of the portfolio.

Specifically, in terms of target selection, market core assets represented by the CSI A500 Index are also suitable as the "core" assets of our investment portfolio, that is, the base position.

On the one hand, the A500 Index adopts a balanced industry stock selection approach, selecting 500 leading enterprises from various industries in the market, without favoring any particular industry or theme, measuring the overall market water level. On the other hand, after each "market bottom," as the overall market continues to rise, the trend of core assets leading to the beta rally will not be absent. Even if the results do not meet expectations, the resilience of leading assets to profit through cycles is strong, and with the current overall valuation not being expensive, there is no need to worry about value destruction.

Currently, the ETF tracking this index with the best liquidity in the market is the A500 ETF fund (512050). As of November 22, the average daily turnover since its listing has exceeded 2.9 billion yuan, leading in its category.

It is worth noting that, in the long term, the market valuation expansion cycle led by core assets has only just begun. Compared to the draft for comments released in late September, the formal draft newly includes CSI A500 and ChiNext Mid-Cap 200 constituents as the targets for formulating a market value management system for listed companies, emphasizing that companies with long-term net losses should formulate a plan to improve the valuation of listed companies. According to statistics, there are more than 60 constituents of the A500 Index with a net loss (PB ratio < 1), with a total weight of more than 14%. At the index level, as of November 22, the overall PB (price-to-book) valuation is only 1.5 times, ranking at the 14.12% historical percentile.

Turning to the allocation of "satellite" assets, we can focus on the direction of various growth themes with high prosperity, greater flexibility in subsequent performance, and expectations of reversal of difficulties. At the end of the year and the beginning of the year, the market often begins to pre-empt industries that price the next year's boom is more dominant. The next year's strong or the direction of reversal of difficulties is expected to be favored by funds.