Admitting that US tech stocks were again weak last night, with QQQ down by 1.73% on a single day and SPY, the broader market ETF, also slightly declining by 0.13%. But what is more noteworthy today is not just the stock prices themselves, but how 'geopolitical risks escalated, leading to a chain reaction affecting defense, gold, the dollar, tech stocks, and interest rate assets.'

First, let's look at the latest development: Russia has escalated its attacks on Ukraine. According to the latest assessment as of July 2, Russia launched large-scale drone and missile strikes against Ukraine between July 1 and 2, with a focus on Kyiv, resulting in at least 27 deaths and 91 injuries. The key point about such news is not just the tragedy itself but also that markets will immediately recalculate something called 'geopolitical risk premium'. In simpler terms, investors demand higher returns as a safety cushion when they perceive the situation to be more dangerous. Imagine if everyone was comfortable riding a fast car before, but now with an accident ahead, many would prefer to slow down and take a safer lane.

Meanwhile, the Middle East has not been truly quiet. The special report on Iran on July 2 continues to update the conflict developments. Although such news does not provide a single explosive number in the summary, its market implications are clear: as long as the situation in the Middle East is not completely cooled down, markets will continue to monitor issues related to energy transportation, regional security, and military orders. In plain terms, both the powder kegs in Europe's east and the Middle East remain intact. As a result, global funds are more likely to shift towards defensive assets.

[未翻译/untranslated] 第三步，台海消息又把这条链补上了。 7 月 2 日的中国与台湾更新提到，台湾立法院长韩国瑜和跨党派代表团与美国国会议员会面，讨论台湾的国际参与、贸易和安全议题。 这条新闻不是说马上会出大事。 但它会提醒市场，亚太安全议题仍在升温。 尤其“安全”和“贸易”放在一起谈，市场自然会想到两件事。 第一，军费和防务采购可能继续增加。 第二，半导体供应链会不会再受扰动。 因为台湾在芯片链条里太重要了。 一旦地缘话题升温，市场就会先把最脆弱的地方挑出来看。

Thus, the fourth step came: semiconductor stocks took the hit. On July 2, all three major A-share indices closed lower, with the semiconductor sector experiencing a significant decline. The same day, news also reported that the Korean Kospi fell by 7.9% due to renewed concerns over AI chips. What does this indicate? It suggests that the market is not just worried about

But today, not all risk assets collapsed together. Bitcoin took a different path instead. On July 2, Bitcoin rose by 4% and regained above $61,000, with the news citing Federal Reserve Chairman Kevin Warsh's statement that inflation risks have eased somewhat. In plain terms, this means the market interpreted it as less pressure for interest rates to rise further. With the pressure on interest rates easing, funds are more willing to venture into more volatile assets. However, it is important to note that today’s crypto divergence actually contradicts our medium-term stance. While the news was short-term positive, our medium-term assessment of fund flows still shows a cold front. This divergence itself is significant, indicating that short-term sentiment and medium-term funds are not aligned on one side.

Following this line of thought, let's look at a few of the most relevant ETFs.

First, let's talk about ITA, which is the US Defense Aerospace sector. ETF Radar has a slightly positive outlook on ITA with consistent signals. The reasons are straightforward: today's main storyline of escalated tensions between Russia and Ukraine, ongoing tensions in Iran, and discussions around Taiwan's security all push defense demand forward. Quantitatively, F segment indicates net inflows of approximately $765 million over the past 20 days. 'Net inflows' simply means that more money flowed into this fund than out, indicating that funds are indeed moving in due to perceived tensions. The second reading is an increase in implied volatility for options to around 28.7% to 33%. 'Implied volatility' essentially means the market's willingness to pay a higher insurance premium for future fluctuations. Higher premiums usually indicate greater concerns about potential future actions. The third reading shows that ITA gained 15.24% from May 5 to July 2, 2026, while SPY gained only 2.90%, resulting in an excess return of +12.34% over SPY. 'Excess return' means it outperformed the broader market by 12.34%. Looking at recent trading activity, ITA has also risen by 8.70% over the past 20 days, aligning with the model's predictions and suggesting that the market is validating this trend.

The second is GLD, or gold. ETF Radar has a slightly positive view on GLD, but there was no independent quantitative support today. Therefore, we can only make qualitative assessments here. The logic for why gold benefits is old-fashioned yet very practical. When geopolitical risks rise, many funds seek assets that are not someone else's liability, and gold becomes more appealing as a result. For example, when the external winds blow harder, more people want to put their money in an insurance box that won't suddenly close. With both Ukraine-Russia and Middle East tensions ongoing today, gold's defensive attributes are easier to magnify. Yesterday, one of the strongest ETFs on the map was gold mining stocks, with GDX up 4.48% and GDXJ up 4.57%. This is not GLD-specific data but rather a market temperature gauge. At least it indicates that there were people trading on risk aversion last night.

Thirdly, consider the UUP, which tracks the US Dollar Index. The ETF Radar model has a positive outlook on UUP, with multiple indicators moving in the same direction. This is not just about geopolitical factors but also interest rates. Quantitatively, the 2-year Treasury yield from FRED is around 4.14%, and the 10-year yield is approximately 4.44%. In plain terms, 'yield' means the return on investment that the market demands when lending money to the US government. This level of yield indicates that US dollar assets still have appeal. The second reading shows a probability of less than 5% for a rate cut in July according to the market. 'Market expectations,' in simple terms, refer to the probabilities assigned by those who are betting real money on an event. A probability below 5% suggests that most people believe a rate cut is unlikely in the short term. The third reading indicates that the COT net position for Japanese yen futures is approximately -97,092, meaning there are more large positions betting against the yen than those betting for it. This typically corresponds to stronger US dollar. In terms of price action, UUP has risen 3.16% over this window period, outperforming SPY by 0.78%. Therefore, if geopolitical risks persist today, the defensive nature of the US dollar remains intact.

Fourthly, look at SOXX, which represents semiconductors. ETF Radar remains positive on SOXX but there is significant short-term pressure today, so the signals need to be interpreted separately. First, let's address the divergence. In recent news segments, A-share semiconductor stocks have fallen, and South Korea’s market has also suffered a sharp decline due to concerns over AI chips, which clearly does not bode well for SOXX in the short term. Moreover, the tape is not looking good; SOXX fell 5.57% on a single day, 9.42% over the past five days, and 6.40% over the last twenty days. The market is clearly disagreeing with these trends in the short term. However, the system's stance remains positive for the medium term due to reasons such as East Asian expansion of production capacity and AI capital expenditures, which indicate that companies continue to invest heavily in server and chip capacities. In plain terms, 'capital expenditure' means companies are spending real money on building factories and purchasing equipment. Therefore, it is honest to say: The new developments in the news are challenging the system's original positive stance for the medium term. Divergence itself serves as a warning. If geopolitical and supply chain concerns continue to escalate, SOXX may experience significant short-term fluctuations.

Add QQQ as a counter asset related to the main theme. The model readings point to a slightly negative outlook for QQQ, with more focused evidence. Quantitatively, from June 11 to July 2, 2026, QQQ fell by 0.63%, while SPY rose by 0.95%, resulting in an excess return of -1.58% compared to SPY. In plain terms, this means it underperformed the broader market. Over the past 20 days, QQQ has also fallen by 4.50%, and it dropped another 1.73% yesterday. The core transmission here is not that 'tech stocks are weak,' but rather high interest rates, rising geo-political risks, and the market's tendency to avoid high-valuation growth stocks. High valuation means that there was a lot of optimism about future performance built into these stocks. When the environment deteriorates, this optimism is most easily discounted.

Let's touch on the crypto market. Bitcoin rebounded last night, with positive news. However, from a technical perspective, IBIT is now mixed, indicating conflicting signals. Meanwhile, FBTC, ARKB, BITO, and BLOK have recently turned more negative in their medium-term outlooks. The core quantitative evidence is that during the week ending June 26, the US spot Bitcoin ETF experienced net outflows of approximately $1.79 billion, with a single-day net outflow of about $445.1 million, and this has been for seven consecutive trading days. 'Net outflows' simply mean that more money is leaving than entering. Therefore, here we have a typical scenario where short-term news is positive, but medium-term capital flows are cold. Do not interpret last night's rebound as a reversal of the entire trend directly.

Today's news thread is quite clear in its main axis: rising geo-political risks are first pushing funds into defense, gold, and the US dollar, before pressing down on tech and semiconductors. Cryptocurrencies, meanwhile, show short-term sentiment warming up, but mid-term funding has yet to fully follow through. Again, please note that the above is a directional prediction from our system quant model for general markets and does not constitute personalized investment advice; consult a licensed investment advisor before making any investments.