In the past three years, domestic investors in China have faced immense challengesThe A-shares and Hong Kong stocks have consistently weakened, leading to what many describe as the "lost three years" for the domestic real estate market, a key component of many Chinese citizens' asset allocation strategies.

In response to this downturn, there have been numerous discussions in various publications advocating for a narrowed focus within the domestic stock market, suggesting investments in a select few high-quality companies—those with high asset returns, low leverage, and stable dividendsFurthermore, leveraging any legally feasible tools to diversify investments into overseas markets, particularly in U.Sand Japanese stocks, has been widely recommended to hedge against the risks associated with the domestic economic cycle's downturn.

In fact, those bold enough to shift their investment strategies and step outside their comfort zones—particularly through overseas investments—have greatly benefited from the substantial increases in the U.S

stock marketEven holding U.STreasury bonds during this period yielded nearly 5% annualized returnsAdditionally, with the appreciation of the dollar, returns were even more attractive.

For the daring investors who ventured into alternative assets like Bitcoin, the last few years have been even more rewarding, seeing returns that have more than doubled.

As we look towards 2025, one critical question arises: what changes will our asset allocation strategy require?

Should we continue to over-invest in U.Sstocks? Or is it time to refocus on the domestic market?

Let us deliberate on this matter together.

Can U.Sstocks continue to rise indefinitely?

Since hitting a bottom in early 2009, U.S

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stocks have seen a remarkable 15-year rallyYear after year, many market experts, both domestic and foreign, have predicted a top, only to watch their forecasts shatter as the market continues to rise.

Historically, U.Sstocks have experienced short-term corrections before returning to growthEven events like the COVID-19 pandemic in 2020 or interest rate hikes in 2022 only caused temporary dips, with new highs reached shortly afterThe S&P 500 index, emblematic of the U.Smarket, has surged from just over 600 points to approximately 6000 as of December 9, 2024—nearly a tenfold increase.

The impressive performance of the U.Sstock market has left many Chinese investors envious, as it seems to wield an invincible power over the realm of investments, despite the S&P 500's current valuation soaring to 31 times earnings, a historic high.

Yet convincing the confident professionals on Wall Street to reassess their bullish outlook seems futile

The extended bull market might have entrenched the belief that U.Sstocks will perpetually rise.

However, within this upward trajectory, competition has attracted some of the world’s finest companies to the U.Sstock market, assuring the quality of listed companies and allowing investors to share in the growth of the global economyCompanies like Amazon, Apple, Google, NVIDIA, Meta, Microsoft, and Tesla have emerged as leaders, bolstering this notion of invincibility.

Yet, one must not forget: "No asset only goes up, and cycles are eternal." Looking back just over a decade, one can recall that between 2000 and 2009, U.Sstocks stagnated for years.

Assessing the outlook for the U.Seconomy, the consensus seems to suggest controlled inflation and moderate GDP growth

However, the expectations for continuous high profit growth among listed companies appear disconnected from the economic fundamentals.

An interesting move from a 'not-mainstream Wall Street investor' warrants attention: Warren Buffett's Berkshire Hathaway recently reported their Q3 earnings, showing a reduction in stock holdings which has pushed their cash reserves to a historic high of $325.2 billion, up 17.4% from $276.9 billion at the end of Q2.

By the end of Q3, the fair value of Berkshire’s equity holdings had dropped from $353.8 billion at the end of the previous year to $271.65 billion, indicating a significant reduction in exposure to U.Sstocks.

In Q3 alone, Berkshire sold off a total of $36.1 billion in stocks, including reducing their stake in their largest holding, Apple

As of the end of Q3, Berkshire's total holding in Apple still exceeded $69.9 billion.

Additionally, Berkshire also reduced their stake in another major holding, Bank of America, by more than $10 billion, leaving a total holding value of $31.7 billion at the end of Q3.

Buffett's investment style is rather unique, notably lacking a significant position in long-term bonds or gold-oriented investments.

Despite holding a vast amount of U.Sstock assets, Buffett's allocation to these equities has evidently decreased, while the proportion of cash has significantly risen.

What we are witnessing now is a phase where "stock gods" are prevalentThe two phenomena outlined here deserve attention:

1. Professionals remain bullish and reject any dissent.

2. Mr

Buffett appears to be quite "timid," persistently trimming his holdings.

This mirrors the market conditions just before the 2000 tech bubble burstWill the outcome be different this time?

Regardless, the levels of debt held by both the U.Sgovernment and its enterprises are sharply elevatedHigh debt levels can increase repayment pressures when interest rates rise, potentially impacting the flexibility of fiscal policies.

Based on the above assessment, I believe that U.Sstocks may not yield excessive returns for investors in the coming year or a significant period ahead, as seen in the past decade.

How long can Bitcoin "hover" around its current price?

Recently, Bitcoin surged significantly, surpassing the $100,000 mark

Analysts attributed this rise to several factors:

1. Increases in holdings by institutions and sovereign nations: Institutional investors have been buying Bitcoin through spot ETFs, and countries like El Salvador have included Bitcoin as part of their reservesAdditionally, the U.Smay plan to establish a strategic Bitcoin reserve, heightening market demand expectations.

2. Improved macroeconomic environment: Expectations of a moratorium on interest rate cuts by the Federal Reserve, easing inflation pressures, and a weakening dollar have enhanced Bitcoin's allure as "digital gold."

3. Expansion of technology and application scenarios: The crypto industry is continuously evolving, and Bitcoin's user base and application scenarios are gradually wideningCurrently, out of the approximately 5.4 billion internet users globally, only 600 million are crypto users, indicating vast growth potential.

4. Market sentiment and supply-demand dynamics: Bitcoin's inherent scarcity has intensified market expectations of a supply-demand imbalance, driving prices upwards.

However, Bitcoin, as a virtual currency, presents significant risks for investors

Its initial value can be traced back to its creation in 2009 by an anonymous entity known as Satoshi NakamotoInitially, it had no market value, as no one was willing to purchase it using fiat currencies.

The first recorded transaction using Bitcoin occurred on May 22, 2010, when a programmer acquired two pizzas for 10,000 Bitcoins, celebrated today as "Bitcoin Pizza Day." This event marked the first time Bitcoin transitioned from a fictional digital asset to a currency with actual material value.

At the time, the worth of those 10,000 Bitcoins was roughly $25, making the initial Bitcoin value around $0.0025. Today, Bitcoin's market price has soared to $100,000.

However, it continues to face numerous potential risks, including regulatory challenges, taxation and compliance pressures, extreme volatility, technological and security risks, and energy consumption controversies.

If someone declares that Bitcoin, currently valued at $100,000, will eventually become worthless, I find no fault with this assertion

Personally, my strategy is to safeguard my own personal territory; regardless of how powerful others may be, I will remain unfazed; no matter how others excel or thrive, I will continue observing quietly.

For those with abundant resources and a sense of recklessness, feel free to proceed as you wish.

What does the outlook for domestic assets look like for next year?

Firstly, let's analyze the overarching trendsThe political bureau meeting on September 26 utilized terms like "sense of responsibility and urgency," providing clear signals of a comprehensive shift in macro policies.

Less than three months later, another economic work meeting held on December 9 reiterated the need for a steady yet progressive approach next year, emphasizing innovation while adhering to established principles, implementing a more proactive fiscal policy coupled with moderately eased monetary policy, and enhancing the policy toolbox.

This marked China's first endorsement of a "moderately relaxed" policy since 2011. Simultaneously, there was a rare call to "increase extraordinary counter-cyclical adjustments."

The gradual yet definitive stabilization of the economy appears certain amidst this increasingly proactive fiscal and relaxed monetary backdrop.

Real estate has weathered the "lost three years," and overall property prices have predominantly reverted to levels seen in 2016-2017.

We have observed continuous supportive policies for real estate from both central and local governments, making a stable housing market a foregone conclusion

Notably, the "China Real Estate News" recently announced the need for a renewed recognition and affirmation of the real estate sector's pivotal role in the economyThe last time such a position was explicitly acknowledged was in 2003, leading subsequently to a protracted bullish cycle for domestic real estate.

However, I firmly believe that the market will not revisit the previous prolonged bull run, owing to objective factors such as economic cycles, demographic shifts, market demand, and affordability—these factors operate independently of individual subjective desires.

Regarding the domestic stock market's outlook, I suggest adherence to the principle of selecting the best among the bestHolding a diversified portfolio of "good companies" is likely to lead to increasing comfortWith support from "moderately relaxed monetary policies" and "more proactive fiscal policies," the environment for outstanding companies is set to steadily improve, enhancing earnings expectations as well.

Reflecting back on early 2021, the stock prices of top companies were at a peak—for instance, Moutai crossed 2500, and Tencent soared past 700 yuan

During that period of euphoric market sentiment, investors clamored to "grow alongside great companies, cherishing core assets without wavering for a century."

Now, these great companies possess stronger earning capabilities compared to early 2021, yet their stock prices have tightened to around 1500 yuan and 400 yuan, respectively—significantly lower than their values back thenWhat rationale compels one to divest at this moment?

In conclusion, I believe that asset allocation in 2025 should still adhere to the overarching principle of diversificationHowever, when it comes to U.Sstocks, a more cautious approach is warrantedWith no market that only ascends indefinitely, particularly when valuations for U.Sequities are at elevated levels, it would be wise to include some defensive sectors (such as consumer goods, utilities, and healthcare) as a supplementary strategy to core hard tech.

Buffett's recent reductions in Apple stocks coupled with an increase in shares of companies like Occidental Petroleum and Domino's Pizza exemplify a sound defensive strategy.

Moreover, with expectations that U.S