Capri Holdings (CPRI) stock price has suffered a harsh reversal and is on track for the third consecutive week of decline after its acquisition bid failed. It dropped to a low of $19.45, its lowest level since October 2020, and 73% below its highest level in 2023. 

Tapestry and Capri Holdings deal

The main reason why the Capri Holdings stock price has imploded is that the FTC won a legal challenge for its proposed merger with Tapestry, the parent company of Coach, Kate Spade, and Stuart Weitzman. 

In a filing, Capri said that it would file the court ruling to the Court of Appeals after a court gave a preliminary injunction to block the merger transaction. When blocking the merger, Judge Rochon said:

“The evidence reflects that Tapestry perceived the acquisition of Michael Kors to be an opportunity to decrease Michael Kors’s discounting and increase Michael Kors’s prices.”

I believe that the FTC has made a strong case for blocking the merger because it demonstrated that the two companies offer “affordable luxury” products to their customers. As such, a merger could create an American monopoly in that area.

However, the companies could demonstrate that the industry is much bigger and that it is dominated by European brands like LVMH and Burberry. 

My view is that Tapestry will ultimately give up on the bid and focus on building its business. Besides, the odds are significantly against the deal because of their impact on higher handbag prices. 

Read more: Capri stock soars 55% on a merger agreement with Tapestry

So, what next for Capri Holdings?

Therefore, assuming that the Capri Holdings and Tapestry fails, what will happen to the former? 

A look at Capri’s financials shows why it is very committed to the deal. Its annual revenues have been relatively volatile in the past few years. It brought in $5.5 billion in 2019, a figure that dropped to $4.06 billion in 2021. 

Capri’s revenue then rose to $5.61 billion in 2022 and dropped to $5.16 billion in the last financial year as consumer spending eased. 

Worse, its profits have also been moving in the wrong direction. It made a net profit of $822 million in 2021, followed by $616 million in 2022, and a net loss of $229 million in the last financial year. 

The most recent financial results showed that its revenue continued moving in the wrong direction. It dropped by 13% to $1.07 billion, which the management blamed on soft consumer spending.

In all fairness, other big players in the luxury space like Burberry, Kering, and LVMH have reported weak financial results recently, citing softening demand in China. However, Capri’s business seems to be doing much worse than other luxury brands.

Consequently, Capri’s gross profit fell to $689 million, while its loss from operations came in at $14 million, worse than the previous profit of $48 million.

All three brands are not doing well. Versace’s revenue fell by 15.4% to $219 million, while Jimmy Choo and Michael Kors fell by 5.5% and 14.2%, respectively.

The other big issue that Capri faces is that its balance sheet is not all that good. It ended the last quarter with over $461 million in short-term debt, $374 million in lease liabilities, $1.2 billion in long-term debt, and $1.3 billion in long-term lease liabilities. 

These substantially high liabilities are backed by $213 million in cash and equivalents and $902 million in inventories. 

Capri stock price analysis

Capri chart by TradingView

So, what next for the Capri Holdings share price? The weekly chart shows that the CPRI share price has been in a strong bearish trend in the past few months. It recently crossed below the key support at $29.30, its lowest point on August 12.

The stock has formed a death cross pattern as the 50-week and 200-week moving averages have crossed each other.

Capri has also invalidated the inverse head and shoulders pattern, a popular bullish sign. It has also moved below the key support at $37, its lowest point in May 2022. In most periods, a double-top pattern is one of the most bearish signs.

Therefore, the stock will likely continue falling as sellers target the key support at $5.50, its lowest point on March 16. This drop implies a 73% drop from the current level.

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The GBP/USD exchange rate plunged to its lowest point in weeks, while UK bond yields soared as traders reacted to Rachel Reeves’s first budget as Chancellor. The pair was trading at the important support of 1.2900, much lower than the year-to-date high of 1.3430.

UK bond yields soar

The GBP to USD exchange rate continued its strong sell-off after Reeves delivered a mixed budget reading.

In it, she decided to increase taxes in her bid to raise £40 billion, which will be used to fund key priorities like energy transition and the National Health Service (NHS).

Some of these tax hikes will be from the national health insurance deductions and ending the non-dom. Also, she hopes to generate more money from the private equity industries.

At the same time, she hopes to continue borrowing, a move that will stretch public resources at a time when the debt has soared. 

Therefore, there are two main risks that investors are worried about. First, increased borrowing could put the UK at a more dangerous place financially. Second, higher taxes could affect the country’s economy in the long term.

These factors explain why the yield on the ten-year government bonds jumped by 0.09% to 4.45%, the highest level this year. 

The UK economy has been relatively strong this year. Data released in October showed that the economy expanded a bit in the previous month, a better performance than was widely expected. 

The country has also won the battle against inflation as consumer prices have continued falling in the past few months. The most recent report showed that the country’s inflation retreated below the BoE’s target of 2.0% in the previous month.

The BoE has already slashed interest rates once, and analysts expect it to cut more in the next meeting, which will happen on Nov. 7. Such a cut will bring rates from the current 5.25% to 5.0%. In a statement, ING analysts said:

“The extra spending announced in this budget does make us a little less confident in our forecast for a December rate cut, which would follow the 25bp move widely expected next week. But the BoE’s response to fiscal loosening, both earlier in 2024 and this time last year, was fairly muted. In other words, we still think the Bank of England will deliver more aggressive rate cuts than markets now expect.”

US nonfarm payrolls data

The GBP/USD exchange rate also continued falling after the US published the latest personal consumption expenditure (PCE) report, the Fed’s favourite inflation number. The Fed loves this figure because, unlike the Consumer Price Index (CPI), it looks at price changes across urban and rural areas.

Data by the statistics agency showed that the headline PCE dropped from 2.3% in August to 2.1% in September. It rose from 0.1% to 0.2% on a month-on-month basis.

The core PCE, which excludes the volatile food and energy prices, remained unchanged at 2.7% during the month. These numbers confirmed that the country’s inflation was moving in the right direction, and will soon move below the Fed’s target of 2.0%.

The next important catalyst for the GBP/USD pair will be the upcoming US nonfarm payrolls (NFP) data, which will provide more information on the state of the economy.

Economists expect the data to show that the economy created 115k jobs in October, a big drop from the 254k it created a month earlier. 

The unemployment rate is expected to have remained at 4.1%, while the average hourly earnings remained at 4.0%.

These numbers will come as the Fed prepares for next week’s meeting, in which analysts expect that it will cut rates by 0.25%. If this happens, it will take the country’s rates to between 4.75% and 5.0%. 

The US dollar index has jumped even as the Fed cuts interest rates. This recovery accelerated after the US published encouraging NFP and retail sales data last month.

GBP/USD technical analysis

GBP/USD chart by TradingView

The daily chart shows that the GBP to USD exchange rate peaked at 1.3430, its highest point on September 26.

It has dropped below the 38.2% Fibonacci Retracement point, meaning that bears are in control. The pair has also crashed below the 50-day and 100-day Exponential Moving Averages (EMA), pointing to more downside.

Also, the MACD indicator has moved below the zero line and is at its lowest level since April 26. The Relative Strength Index (RSI) has moved below the neutral level of 50 and is pointing downwards. 

The GBP/USD pair has moved below the ascending trendline that connects the lowest swings since April 22nd this year.

Therefore, the path of the least resistance for the pair is bearish, with the next point to watch being the 50% retracement point at 1.2735. 

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Ethereum price resumed its downward trend this week as odds of Donald Trump winning next week’s general election retreated. Ether fell to $2,500, a few points below this week’s high of $2,725.

Donald Trump’s odds of winning

Ethereum and other cryptocurrencies have retreated sharply in the past few days as Polymarket data showed that Trump’s odds of winning the election fell to 62% on Friday, down from this week’s high of $67%. Kamala Harris odds have moved to 38%.

The same trend has happened in other markets. His odds on Kalshi have dropped from 62% to 56%, while PredictIt’s odds have moved to 55%.

While Trump has a lead towards the general election, the trend is not moving in the right direction. 

At the same time, traders realize that this election may move in either direction since official polls are tight. Data from the New York Times shows that all swing states are within the margin of error.

Polls have been wrong in the past. For example, most of them gave Hillary Clinton a higher chance of winning in the 2016 election. They also showed that Republicans would have a clean sweep during the mid-term elections. 

Therefore, there is still uncertainty about what will happen in the next election. This also explains why Trump-themed assets have dived. The Trump Media & Technology stock has plunged by over 35% from its highest level this month.

Similarly, Trump cryptocurrencies like MAGA, TREMP, and  Trumpcoin have all crashed by double-digits in the past few days. 

Bitcoin and Ethereum prices do well when there are higher chances of Donald Trump winning the election in the US. Besides, he would be the first president with crypto holdings, which Arkham estimates are worth almost $6 million. 

Trump has also pledged to fire Gary Gensler and appoint a crypto-friendly head of the Securities and Exchange Commission (SEC).

However, the reality is that the role of a president in the crypto and stock market is relatively overestimated. Besides, Ethereum and Bitcoin soared to their record highs during Joe Biden’s presidency. 

Ethereum ETF inflows are struggling

Ethereum price remains in a deep bear market as data shows that its ETF inflows are not doing all that well. 

Data shows that Ether ETFs had net inflows of $13 million on Oct. 31st, higher than the $4.36 million on Wednesday and $7.65 million a day earlier. Altogether, these funds have had net outflows of over $480 million since their inception.

There are signs that investors are now more focused on Bitcoin ETFs, which are firing on all cylinders. Their inflows have soared to over $24.21 billion this year, a trend that may continue in the foreseeable future. 

The iShares Bitcoin ETF now has over $26 billion and is closing the gap with the iShares Gold ETF (IAU), which has $33 billion in assets. This is notable since IBIT was launched this year, while the IAU was launched in 2005.

Ethereum is losing market share

At the same time, there are signs that Ethereum has weak fundamentals, which explains why its performance is lagging. 

First, as shown below, the amount of Ethereum in exchanges has increased in the past few weeks, which is a sign that some investors are selling their coins. These exchange reserves rose to 19.5 million, its highest level since July, and much higher than the year-to-date low of 18.65 million.

ETH reserves | Source: CryptoQuant

At the same time, Ethereum is losing market share across industries like NFT and decentralized finance (DeFi).

Data compiled by CryptoSlam shows that Ethereum NFT sales dropped by over 34% in October to $119 million. That decline was much worse than the 27% and 23% drop in Bitcoin and Solana. 

The total value locked (TVL) in Ethereum rose by 5% in October to $48 billion. In contrast, Solana’s TVL jumped by 11%, while Base soared by 12% to $2.45 billion. 

What is notable, however, is in the DEX industry, where Solana handled transactions worth $52 billion, while Ethereum had $41 billion. The biggest networks in the Solana network were Raydium and Orca.

Ethereum price weak technicals

ETH chart by TradingView

The daily chart shows that the price of Ethereum has remained under intense pressure in the past few days.

Unlike Bitcoin, it has remained below the 50-day and 100-day Exponential Moving Averages, meaning that bears are in control.

Ethereum has moved to the 61.8% Fibonacci Retracement point. Most importantly, it has formed a bearish pennant pattern, which is made up of a long line and a symmetrical triangle pattern. 

Therefore, there is a rising possibility that the coin will have a strong bearish breakout since the triangle is nearing its confluence level. If this happens, the next point to watch will be at $2,117, its lowest point in August.

Read more: Ethereum price prediction: risky pattern points to a breakdown

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The Trump Media & Technology (DJT) stock price suffered a harsh reversal this week as investors focused on the upcoming general election, which I believe will be a Black Swan event for the company. It dropped to $35 on Thursday, down by over 35% from its highest level this week.

The Black Swan event

Author Nicholas Taleb described a Black Swan event as a rare that has widespread consequences. The COVID-19 pandemic was a good example of that event.

According to Taleb, a Black Swan event is characterised by its extreme impact, rarity, and retrospective predictability.

A company or an asset can also have a similar event, and next week’s general election will be a good one for Trump Media & Technology, the parent company of Truth Social.

This election will determine whether Truth Social will continue operating in the future or not. If Donald Trump wins the election, the company will become a solid social media network since it will be his main means of communication when he is in the White House.

A victory will also lead to more revenue for the company as companies, countries, and other organisations seek favor with his administration. A good example of this is what happened in the last administration when lobbyists used to gather at his Washington hotel.

If he loses, however, and because of his age, he will likely lose relevance in the US. Besides, it will be his second presidential loss. He also lost the House of Representatives in 2018 and won by a small margin in the last midterm elections.

At the same time, if he loses the election, he will likely be exposed to more legal issues and a need for cash, which could push him to sell most of his stake. Besides, he will have nothing to lose at the time. 

Again, if he loses the election, many investors who bought the stock before that will likely sell their shares. That’s because Truth Social has some of the worst fundamentals in corporate America.

The election is also a Black Swan Event because of a concept known as buy the rumor, sell the news. This is a situation where investors buy an asset ahead of a key event and then exit the trade after it happens. 

This also happens as investors wait for the next catalyst since the one that they were anticipating has already happened. A good example of this is what happened after April’s Bitcoin halving. 

Trump’s odds of winning are falling

The DJT stock price has crashed as data show that Trump’s odds of winning the presidency have slipped in the past few days.

Data by Polymarket shows that his odds have fallen from 67% earlier this week to 62%. Kamala Harris’s odds have moved to 36%. 

Analysts caution that the election could move in either direction because official polls are extremely close. 

According to the New York Times, Harris leads the national average with just one point, meaning that it is within the margin of error.

Trump leads in Nevada, Pennsylvania, and Georgia by about 1%. He also leads in Georgia and Arizona by 2% and 3%, while Harris leads in Wisconsin and Michigan. 

Polls have been relatively unreliable in the past few months. For example, they did not predict Trump’s victory in 2020. They also predicted that Republicans would have a clean sweep in the last mid-term elections.

Read more: DJT and Phunware stocks have surged: buy or sell?

Trump Media has weak fundamentals

At the same time, the DJT stock will react to its weak fundamentals. In the first place, the website is not seeing any substantial traffic, according to data by SimilarWeb. It has just 13.48 million visitors in September, an 18.4% drop from the previous month.

In contrast, Reddit had over 3.42 billion visitors, while Rumble, a popular conservative-leaning YouTube alternative had over 60.6 million visitors. This is notable since Trump Media is valued at over $7 billion, while Rumble has a market cap of $1.7 billion. 

Unlike Truth Social, Rumble has a real utility and is making money as its revenues have moved from $3.4 million in 2019 to $81 million in 2023. Rumble has become more than a political platform since the network has expanded to other areas like sports and entertainment. 

DJT stock price analysis

DJT chart by TradingView

At this point, a technical analysis is not an ideal way to predict what will happen to the DJT stock price since its performance will depend on the outcome of the election. 

On the positive side, the Truth Social stock price remains above the 50-day and 100-day Exponential Moving Averages (EMA). It also seems like it is forming a double-top pattern, meaning that it could rebound and retest the important resistance point at $54.53, its highest point on Oct. 29.

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The Schwab US Dividend Equity (SCHD) and the Vanguard High Dividend Yield (VYM) ETFs have pulled back in the past few days. The VYM fund retreated to a low of $127.78, down by over 3% from the highest point this year. 

SCHD, one of the most popular funds in the market, has dropped from $28.90 in October to $28.2. 

These funds have done well this year, with the VYM fund rising by 14.47% and the SCHD moving by 11.2%. They have, nonetheless, underperformed the broader funds like the Invesco QQQ (QQQ) and the Vanguard S&P 500 ETF (VOO).

US election and its impact

One of the top catalysts for the SCHD and VYM ETFs will be the upcoming US election, which will happen on Tuesday. 

The latest polling data shows that the election results will be close, with Donald Trump and Kamala Harris being tied in most swing states. 

Trump has pledged to implement large tax cuts and ease regulations, which are positive for corporate America. His tariffs and risk of a trade war will have an impact on top companies, especially those with exposure to China.

Harris, on the other hand, will be more of a continuation president. Her campaign has focused on climate and housing issues. She has also hinted towards tax hikes, with her plan pledging moving the corporate tax rate from 21% to 28%.

What is clear, however, is that the two presidential candidates will broadly be bad for America because they have not addressed the soaring debt burden. Data shows that Trump’s policies will add over $7.5 trillion to the debt, while Harris will add $3.5 trillion.

Another clear thing, based on history is that stocks do well after an election since investors often embrace the new normal. Therefore, based on this alone, there is a likelihood that the VYM and SCHD ETFs will do well in November. 

Read more: SCHD: Blue chip SWAN ETF braces for 2 key crucial events

Federal Reserve interest rates

The other catalyst for the two ETFs and the US markets in general will be the Federal Reserve, which is expected to deliver its interest rate decision on Nov. 7. 

The bond market points to a potential hawkish Federal Reserve, with the ten-year and 30-year rising to the highest point in months.

Next week’s decision will be impacted by the upcoming non-farm payroll (NFP) data, which will provide more color about the labor market. A weak NFP number will point to a more dovish Federal Reserve in next week’s meeting. 

American stocks will likely do well no matter what the Fed does next week because the path of cuts in 2024 is clear.

Corporate earnings ahead

The SCHD and VYM ETFs have reacted to several corporate earnings in the past few weeks. Big American banks like Goldman Sachs, JPMorgan, and Morgan Stanley published results that were significantly better than expected.

A report released last week by FactSet showed that the earnings growth of companies was 3.6%. These results were of 37% of companies in the S&P 500, implying the fifth consecutive quarter of earnings growth.

The most important companies in the US like Alphabet, Microsoft, Amazon, and Meta Platforms have all published their earnings report.

However, these firms are not in the VYM and SCHD ETFs, and many of their constituents will publish their results this month. 

The first big names to watch will be oil giants like ExxonMobil and Chevron, which will publish their results on Friday. 

Other top names that will release on Nov. 1 are Church & Dwight, T. Rowe Price, Charter Communications, and Cardinal Health.

More companies in the funds like Qualcomm, Gilead Sciences, CVS Health, Apollo Global, and Archer-Daniel Midlands will release their earnings.

The other potential catalyst for the SCHD and VYM ETFs will be the fading geopolitical issues, especially in the Middle East. Israel’s response to Iran’s missile barrage was relatively muted since it did not involve its nuclear and oil infrastructure. 

This means that these tensions will continue easing in November, which could push oil prices lower, a positive thing for stocks.

Read more: Love the SCHD ETF? CLM and CRF are better yielding alternatives

SCHD and VYM outlooks

SCHD chart by TradingView

The SCHD and the VYM ETFs tend to be highly correlated, as evidenced by their recent pullback. On the daily chart above, we see that the SCHD ETF has remained above the ascending trendline that connects the lowest swings since June 14.

The fund also remains above the 50-day Exponential Moving Averages, meaning that bulls are in control.

Therefore, the fund will likely bounce back as bulls target the year-to-date high of $28.92. A move above that level will see it rise to the key resistance point at $30.

The VYM ETF also has a similar price action as the SCHD fund. It has also remained above the 50-day moving average, and an ascending trendline, pointing to more gains. 

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