‘We’ve had three consecutive days of declining net new cases’: Strategist in Italy

Tematica Chief Macro Strategist Lenore Hawkins joins On The Move from Italy to discuss the latest impact the country is seeing from the coronavirus.

Video Transcript

- Welcome back to Yahoo Finance. We are watching a bit of a rally on Wall Street. The Dow up more than 500 points. The S&P 500 also in positive territory. The NASDAQ has also been in positive territory, but has fallen back negative. It's off about 20 points.

We want to head to Lake Como, Italy. And that's where we find Lenore Hawkins, the Chief Macro Strategist at Tematica. You have been living under lockdown. Is it three weeks or more now? What's the latest you can tell us about the situation?

LENORE HAWKINS: We are in week three of the total lockdown. And they've just continued to tighten up the situation. And as of this week, we are no longer allowed outside, even for a walk or to go for a run. So my exercise consists of going up to my roof and running around in circles. It's gotten pretty grim.

We have seen some signs of optimism, though. We've had three consecutive days of declining net new confirmed cases. So that's good news. On the negative side, we've seen an increase-- we had a couple of days where the deaths were declining. We did see an uptick in those, but those are a little bit more of a lagging indicator versus the net new cases, which is a leading indicator. And that's showing some signs of optimism.

And you were mentioning earlier about Target trying to take some measures to protect its employees. Well, here, the only place I can go is to either a grocery store or a tobacco shop, obviously because it's Italy, or to a pharmacy. If you are going to go into a shop, the first thing they do is actually check your temperature.

- Lenore. It's Julie here. So aside from the sort of day-to-day stuff that you're experiencing there, which now a lot of us are experiencing here in the US as well to varying degrees, from your job perspective, what's the latest in terms of your thinking about how it's going to affect Italy economically and in the markets as well as broader Europe? As we know, Italy was one of the weaker economies in Europe even going into this.

LENORE HAWKINS: Yeah. I think no one really is appreciating the magnitude of this. I think it's a little tough until you are living in it day to day, because it is just something wholly unprecedented in basically human history. I mean, we've really never had a global economy that is this interconnected.

And if you speak to CEOs of major companies, they're telling you that this is a bit like having the 1929 recession on top of a 9/11 in the midst of a great financial crisis. And we came into all of this where global debt was at record high levels. So we've already been on a house of cards.

Now, in Italy, what we're seeing is a government that is doing a horrible job. And I think the American government can really probably take a lesson out of what not to do from here. For example, we had Prime Minister Conte going on Facebook on a Saturday night at 11 o'clock to tell people that some of the policies were going to be changed. Well, those policies had not all yet been agreed upon.

And they just left everybody much more confused. And there's now talk about having the President of Italy, which he can-- usual to do this, but the president basically could kick everyone out and bring Mario Draghi back in, because things have gotten pretty grim here.

In terms of what we're looking at with the markets, I don't think we're really going to see a bottom, because everybody keeps saying, you know, when's the bottom? We're not going to see a bottom here until we get our arms around controlling this pandemic. And one of the things that is absolutely vital for that is to get testing under control. The FDA really dropped the ball here, because they only allowed initially the test from the CDC, which turned out to be defective anyways.

One of the best ways to get around this is if we do have that testing, you don't need to quarantine everyone, because you know who is contagious and who is not. And you can really open the economy up. Italy's trying to get its arms around that and to do some widespread testing that would be kind of repeated regular testing so that people could get to work again.

- Let me ask you this. We're awaiting the vote in the US Senate on the $2 trillion stimulus for the United States. House is expected to eventually pass it. Would this be the kind of-- I'm going to use the Marshall Plan from World War II or after World War II. Is this the beginning of what we might see a Marshall Plan, where the United States takes the lead to save itself, and the offshoot of that is it helps save places like Italy and Europe?

LENORE HAWKINS: It will help, but Italy is in such a bad shape coming in to this, thinking what we're going to see here is this is either going to make or break the euro. If the nations within the eurozone do not work together, and so far that has not been working very well, if they do not work together to help each other out and see some sort of massive spending, the eurozone will break apart.

And that is going to have some really interesting consequences for the dollar. We're already seeing a lot of trouble with the dollar appreciating against every other currency. If the euro were to get kind of wobbly, and I would wager that at least if the euro doesn't formally break apart, there are going to be times where it's going to be called into question, that's going to put even more upward pressure on the doll-- [AUDIO OUT] consequences in the world that has roughly $13 trillion worth of US denominated debt.

- Lenore, I guess this is more of a personal question. I find it interesting how globally the conversation has shifted or there's been this debate between privacy and safety. You look at a place like China, where they just went all in on surveillance, tracking everybody's temperature and mapping that all out.

We've seen that in places like Israel that have kind of adopted similar tactics. And yet, when you look at the Western countries, it seems like there's still a bit of a push and pull. I'm wondering how you have seen that debate shift as you've seen the cases ramp up in Italy.

LENORE HAWKINS: Yes. One of the things we've seen is you are not to, unless a grocery store, like, there's talk of that they are actually tracking people with our phones. So seeing if you are moving a certain distance away from the place where your phone normally resides. Italy has a bit of a different relationship with the government than the United States has.

Here, the best way I could describe it is a bit more the view you have to ask permission first from the government before you can do it, whereas in America, it's like I can do whatever I want. Darn it. I think the US is going to see a lot of push and pull on that. But one of the ways that this could kind of be avoided is we get back to that testing.

And then rather than having the testing being something that's driven by the government, which would really not sit well with the American public, is to push it onto the employers, because the employer has really like they do not want to have people who have this coming into work, infecting other employees or infecting their customers. If we were to push it there, I think you would have people not get quite so nervous. But for that to work, of course, you have to have the tests available.

- Lenore Hawkins is the Chief Macro Strategist at the Tematica. We wish you the best. There you are in Lake Como, Italy.

LENORE HAWKINS: Thank you.

- We look forward to the end of this crisis so we can one day have you in studio.