Bloomberg Audio Studios, Podcasts, radio news. This is Bloomberg Business Wait Inside, from the reporters and editors who bring you America's most trusted business magazine, plus global business, finance and tech news. The Bloomberg Business Week podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio.

Bloomberg Audio Studios, Podcasts, radio news. This is Bloomberg Business Wait Inside, from the reporters and editors who bring you America's most trusted business magazine, plus global business, finance and tech news. The Bloomberg Business Week podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio.

It's safe to say we are living in a world fullest of prelatives. Pick your topic right. It feels like our Bloomberg team noting and what will go down is the most spectacular it failure that the world has ever seen. A Box software update from cybersecurity firm CrowdStrike holdings crashing countless Microsoft Windows computer systems globally. It's important to note, right, David, this wasn't a cyber hack, not a.

It's safe to say we are living in a world fullest of prelatives. Pick your topic right. It feels like our Bloomberg team noting and what will go down is the most spectacular it failure that the world has ever seen. A Box software update from cybersecurity firm CrowdStrike holdings crashing countless Microsoft Windows computer systems globally. It's important to note, right, David, this wasn't a cyber hack, not a.

Cyber hack as we understand it, and this is just part of a routine fix. But this is clearly something that was so pervasive in so many computer systems around the world they had a major effects. Microsoft and CrowdStrike rolling out fixes. Systems are being restored for several hours. Bankers in Hong Kong, doctors in the UK, emergency responders in New Hampshire, all over the place finding themselves locked out of programs that are critical to keeping their operations afloat. Here is CrowdStrike co CEO George Kurtz. Earlier today on NBC.

Cyber hack as we understand it, and this is just part of a routine fix. But this is clearly something that was so pervasive in so many computer systems around the world they had a major effects. Microsoft and CrowdStrike rolling out fixes. Systems are being restored for several hours. Bankers in Hong Kong, doctors in the UK, emergency responders in New Hampshire, all over the place finding themselves locked out of programs that are critical to keeping their operations afloat. Here is CrowdStrike co CEO George Kurtz. Earlier today on NBC.

News, the system was sent an update and that update had a software bug in it and caused an issue with a Microsoft operating system. And we identified this very quickly and remediated the issue. And as systems come back online, as they're rebooted, they're coming up and they're working. And now we are working with each and every customer to make sure that we can bring them back online for more and what happened.

News, the system was sent an update and that update had a software bug in it and caused an issue with a Microsoft operating system. And we identified this very quickly and remediated the issue. And as systems come back online, as they're rebooted, they're coming up and they're working. And now we are working with each and every customer to make sure that we can bring them back online for more and what happened.

And what's happening next. We're joined now by Bloomberg Intelligence senior tech industry analyst man Deep Sing who's here in our studio in New York, along with Bloomberg News cybersecurity reporter Jamie Tavey who's in our Washington, DC bureau and Deep. Let me start with you, the co CEO. They're saying, this process is underway, how long is it going to take? And we were marveling at sort of how it affected so many parts of the economy, how widespread was thises and how bad could it have been?

And what's happening next. We're joined now by Bloomberg Intelligence senior tech industry analyst man Deep Sing who's here in our studio in New York, along with Bloomberg News cybersecurity reporter Jamie Tavey who's in our Washington, DC bureau and Deep. Let me start with you, the co CEO. They're saying, this process is underway, how long is it going to take? And we were marveling at sort of how it affected so many parts of the economy, how widespread was thises and how bad could it have been?

Yeah, I mean, look, the good thing, as you noted rightly is it's not a cyber attack. The last thing a cyber security company wants is a cyber attack on their own system, so that's not the case. But clearly the impact is wide reaching, simply because the number of endpoints the networks. If you take that into account, and I know the CEO said we have rolled back the changes, it requires a lot of manual steps. Even though they have rolled back the code or the content changes they made to their software, but that doesn't fix the issue. Otherwise the systems would have been all up by now. We know they're not. So the reason why this will linger on for a bit and god knows if it's going to be weeks or months. But clearly there are manual fixes to be done. And you have to remember not all of the Windows environments are at the same operating system. They're running different versions, some of them are very old. How do you fix that? Because I think the fix or the software update that they did impacted the different versions in a different way.

Yeah, I mean, look, the good thing, as you noted rightly is it's not a cyber attack. The last thing a cyber security company wants is a cyber attack on their own system, so that's not the case. But clearly the impact is wide reaching, simply because the number of endpoints the networks. If you take that into account, and I know the CEO said we have rolled back the changes, it requires a lot of manual steps. Even though they have rolled back the code or the content changes they made to their software, but that doesn't fix the issue. Otherwise the systems would have been all up by now. We know they're not. So the reason why this will linger on for a bit and god knows if it's going to be weeks or months. But clearly there are manual fixes to be done. And you have to remember not all of the Windows environments are at the same operating system. They're running different versions, some of them are very old. How do you fix that? Because I think the fix or the software update that they did impacted the different versions in a different way.

Interesting, man, how did this happen? Why did this happen? I mean, Microsoft knows what they're doing, right you roll out something.

Interesting, man, how did this happen? Why did this happen? I mean, Microsoft knows what they're doing, right you roll out something.

CrowdStrike knows what they're doing.

CrowdStrike knows what they're doing.

How did this happen.

How did this happen.

I mean, it's a big, I think failure in terms of the testing procedures that these companies have to carry out before rolling out their code changes. And the CEO said it wasn't a code change, it was a content file change, so basically a configuration change that runs at the operating system layer. Otherwise, how do you bring down an entire system if it's not at the operating system level. And it also puts into questions, you know, the single point of failure aspect, because all these companies invest in back end systems and replicating you know, backup environments that should come online if something like this were to happen, but that apparently didn't happen and everything went down at the same.

I mean, it's a big, I think failure in terms of the testing procedures that these companies have to carry out before rolling out their code changes. And the CEO said it wasn't a code change, it was a content file change, so basically a configuration change that runs at the operating system layer. Otherwise, how do you bring down an entire system if it's not at the operating system level. And it also puts into questions, you know, the single point of failure aspect, because all these companies invest in back end systems and replicating you know, backup environments that should come online if something like this were to happen, but that apparently didn't happen and everything went down at the same.

Time, Jamie the uninitiated, how does this kind of software work? We talked about sort of the scale of this, how many companies are using it, but what is the kind of security software the CrowdStrike has pioneered? And I've been thinking a lot just about kind of the psychological ramifications of this that people are now going to have fear there's going to be this kind of instability in our connected world.

Time, Jamie the uninitiated, how does this kind of software work? We talked about sort of the scale of this, how many companies are using it, but what is the kind of security software the CrowdStrike has pioneered? And I've been thinking a lot just about kind of the psychological ramifications of this that people are now going to have fear there's going to be this kind of instability in our connected world.

It's a really it's a really interesting question. And I think it really does speak to the inter connectedness of all of the technology and all the systems that we have today. You know, I think that what CrowdStrike does is because it provides endpoint security protection, it has to have access to your system and that's what that's where it's sort of the compromise of the Microsoft system came into play. And look, it's it's not a good day for the cybersecurity industry. It's something that everyone is they're concerned about it because it is a real question about well how you know, as men Deep said, you know, testing before you put it out there. But while it isn't actually a cyber security incident, we do hear and we are hearing from people that this is a perfect opportunity for a lot of people to take advantage of those systems being down, to get in there and try to attack it, attack systems in some way. So the vulnerability right now is it's there, and there are people who would be using as an opportunity to take advantage of that.

It's a really it's a really interesting question. And I think it really does speak to the inter connectedness of all of the technology and all the systems that we have today. You know, I think that what CrowdStrike does is because it provides endpoint security protection, it has to have access to your system and that's what that's where it's sort of the compromise of the Microsoft system came into play. And look, it's it's not a good day for the cybersecurity industry. It's something that everyone is they're concerned about it because it is a real question about well how you know, as men Deep said, you know, testing before you put it out there. But while it isn't actually a cyber security incident, we do hear and we are hearing from people that this is a perfect opportunity for a lot of people to take advantage of those systems being down, to get in there and try to attack it, attack systems in some way. So the vulnerability right now is it's there, and there are people who would be using as an opportunity to take advantage of that.

It makes me wonder though, as we know talk so much about generative AI and increasingly more data out there and more data maybe up in the cloud or some of it on premise. But I do wonder Mandeep, I mean, is this just the beginning of probably similar system failures.

It makes me wonder though, as we know talk so much about generative AI and increasingly more data out there and more data maybe up in the cloud or some of it on premise. But I do wonder Mandeep, I mean, is this just the beginning of probably similar system failures.

I think again, it's hard to extrapolate we are going to see attacks like this because clearly, if it wasn't for an operating system level outage, we wouldn't be talking about this, and you know, the magnitude of it wouldn't.

I think again, it's hard to extrapolate we are going to see attacks like this because clearly, if it wasn't for an operating system level outage, we wouldn't be talking about this, and you know, the magnitude of it wouldn't.

Be this big.

Be this big.

The reason why this had a far reaching impact then a cyber attack would is because it touches the Windows operating systems of you know, Windows, Linux and Apple having their own operating there are three operating systems that control all your devices right now. You can't roll out a fix. If your operating system is down and it needs to be rebooted, you can't do anything. There is no patchwork. And that's where you know, all the backup systems didn't work because there was no way to bring anything online. So that I think is a risk that companies need to think about. But I would say cyber attacks. We have had a lot of cyber attacks, and look, there are data breaches, you have to pay fines. In this case, what I'm really interested in is who's Libel Is it Microsoft? Is it CrowdStrike, who will pay the customers for the indemnification? I mean clearly there was asso. Yeah, I think CrowdStrike probably has to take a lot of the blame. But clearly Microsoft and look, these are the two biggest endpoint security companies. CrowdStrike actually competes with Microsoft in that space, so even though it was on Microsoft system they can say, oh, we will bundle our security solution. And if that was the case, you know, we wouldn't be in this situation.

The reason why this had a far reaching impact then a cyber attack would is because it touches the Windows operating systems of you know, Windows, Linux and Apple having their own operating there are three operating systems that control all your devices right now. You can't roll out a fix. If your operating system is down and it needs to be rebooted, you can't do anything. There is no patchwork. And that's where you know, all the backup systems didn't work because there was no way to bring anything online. So that I think is a risk that companies need to think about. But I would say cyber attacks. We have had a lot of cyber attacks, and look, there are data breaches, you have to pay fines. In this case, what I'm really interested in is who's Libel Is it Microsoft? Is it CrowdStrike, who will pay the customers for the indemnification? I mean clearly there was asso. Yeah, I think CrowdStrike probably has to take a lot of the blame. But clearly Microsoft and look, these are the two biggest endpoint security companies. CrowdStrike actually competes with Microsoft in that space, so even though it was on Microsoft system they can say, oh, we will bundle our security solution. And if that was the case, you know, we wouldn't be in this situation.

So David, you ready put you all your medical information out there?

So David, you ready put you all your medical information out there?

Got to say we saw this play out in medical offices in the hospitals as well. But Jamie, we're using this term endpoint and I want to ask you a bit about that. Men deep talking about sort of how companies are processing this and dealing with this. I mean, companies have had to allow access to their systems. This company to have access to their systems. Does this change that calculus at all? I mean I think of the days when like I bought on cd RAM the McAfee software and put it on my computer and that was like us protecting it from threats? Then what lo those many decades ago? But talk about just the level of comfort that companies have using or outsourcing security in this fashion, what this might do to that.

Got to say we saw this play out in medical offices in the hospitals as well. But Jamie, we're using this term endpoint and I want to ask you a bit about that. Men deep talking about sort of how companies are processing this and dealing with this. I mean, companies have had to allow access to their systems. This company to have access to their systems. Does this change that calculus at all? I mean I think of the days when like I bought on cd RAM the McAfee software and put it on my computer and that was like us protecting it from threats? Then what lo those many decades ago? But talk about just the level of comfort that companies have using or outsourcing security in this fashion, what this might do to that.

That's a really good point, and I think that a lot of the conversation now is about third party vendors and third party entities that you invite into your systems to protect them. And look, every time something like this happens, there is a moment of awareness, there's a moment of oh, let's put in all these protections, let's put in all these guardrails, let's try to figure out how we can mitigate this, and then we go back down again. And you know, it's ironic that you sort of mentioned like refixes, right, because the last time this happened was with the McAfee bug, you know, in twenty ten, and we did have this kind of level of outage across systems universally. So it kind of ebbs and flows, and where at the point where we're seeing the government still exhibit a lot of frustration with people trying to impose minimum cybersecurity standards on a lot of their systems. This doesn't help at all in terms of giving people faith in the security systems that they're meant to be installing. But at the end of the day. Look, this is going to make everyone hyper aware about what they're putting in and what they're sending in as updates, and I would like to think that this would actually give people a little more concern about Okay, before we launched this, are we sure? Are we double sure? Are we triple sure? Just because just the sheer impact that we've seen, not just on crowdstrikes bottom line, but just as Mende said, across the planet.

That's a really good point, and I think that a lot of the conversation now is about third party vendors and third party entities that you invite into your systems to protect them. And look, every time something like this happens, there is a moment of awareness, there's a moment of oh, let's put in all these protections, let's put in all these guardrails, let's try to figure out how we can mitigate this, and then we go back down again. And you know, it's ironic that you sort of mentioned like refixes, right, because the last time this happened was with the McAfee bug, you know, in twenty ten, and we did have this kind of level of outage across systems universally. So it kind of ebbs and flows, and where at the point where we're seeing the government still exhibit a lot of frustration with people trying to impose minimum cybersecurity standards on a lot of their systems. This doesn't help at all in terms of giving people faith in the security systems that they're meant to be installing. But at the end of the day. Look, this is going to make everyone hyper aware about what they're putting in and what they're sending in as updates, and I would like to think that this would actually give people a little more concern about Okay, before we launched this, are we sure? Are we double sure? Are we triple sure? Just because just the sheer impact that we've seen, not just on crowdstrikes bottom line, but just as Mende said, across the planet.

Reminds me of my dad, who was an engineer and so like he had flashlights and back up flashlights and backup redundancy was a big part of our family growing up.

Reminds me of my dad, who was an engineer and so like he had flashlights and back up flashlights and backup redundancy was a big part of our family growing up.

That's a lot.

That's a lot.

Jordan Robertson, you're with us cybersecurity reporter at Bloomberg News, joining us from London. Our teams in Asia London have been following this story as it impacted the globe. Jordan, where are we right now? What's the update? What can you add to this story at this you know, what is it? Two to eleven pm Wall Street time on this Friday.

Jordan Robertson, you're with us cybersecurity reporter at Bloomberg News, joining us from London. Our teams in Asia London have been following this story as it impacted the globe. Jordan, where are we right now? What's the update? What can you add to this story at this you know, what is it? Two to eleven pm Wall Street time on this Friday.

Yeah, it's been a wild day, you know, I mean the day starts with, you know, massive outages related to both Microsoft and CrowdStrike, and we've had to figure out kind of which ones are responsible for which, And as you said, what has turned out to be the case is that CrowdStrike kind of alone is responsible for this massive outage. And you know, what we've learned today is that CrowdStrike has apologized for the They've released kind of instructions for how to fix this problem, but those instructions call for manual fixes. You know, people are going to have to go machine by machine to fix this problem, and it just highlights kind of the fragility and the vulnerability of the modern IT system which is built on you know, really just a few companies that you kind of have to trust and hope are doing the right things when it comes to deploying these patches responsibly.

Yeah, it's been a wild day, you know, I mean the day starts with, you know, massive outages related to both Microsoft and CrowdStrike, and we've had to figure out kind of which ones are responsible for which, And as you said, what has turned out to be the case is that CrowdStrike kind of alone is responsible for this massive outage. And you know, what we've learned today is that CrowdStrike has apologized for the They've released kind of instructions for how to fix this problem, but those instructions call for manual fixes. You know, people are going to have to go machine by machine to fix this problem, and it just highlights kind of the fragility and the vulnerability of the modern IT system which is built on you know, really just a few companies that you kind of have to trust and hope are doing the right things when it comes to deploying these patches responsibly.

Jordan County among those who thought that the blue screen of death was something from years past that we weren't going to face that once again. But you know, you talk about the steps that one has to take now to reboot manually to make this happen. Just play that out a little bit for me now. And men Deep was talking about this a few minutes ago, just sort of what this process looks like and how long it's going to take. I'm sure that every chief technology officer is sending out that strongly worded memo telling the staff to do this immediately as quickly as possible. But what's your sense of how long this is going to take? And indeed, you know how hard it's going to be to get every employee a company to do this. I mean, there are a lot of Windows machines I imagine at most major companies around the world.

Jordan County among those who thought that the blue screen of death was something from years past that we weren't going to face that once again. But you know, you talk about the steps that one has to take now to reboot manually to make this happen. Just play that out a little bit for me now. And men Deep was talking about this a few minutes ago, just sort of what this process looks like and how long it's going to take. I'm sure that every chief technology officer is sending out that strongly worded memo telling the staff to do this immediately as quickly as possible. But what's your sense of how long this is going to take? And indeed, you know how hard it's going to be to get every employee a company to do this. I mean, there are a lot of Windows machines I imagine at most major companies around the world.

Yes, someone remarked online today that you know, this is this is the best malware of the year, you know, and it was delivered by by CrowdStrike. You know, it has essentially the same effect as ransomware does you know a lot of times when we when we write about ransomware cases, we'll talk about, you know, the recovery time will typically take several weeks to a month, and maybe two months or longer. We're looking essentially at that for this incident, you know, according to folks that we've been talking to. And the reason for that is simple. We work in kind of a remote work era. Now, not everybody is in an office where they have their computers, and unfortunately, for these affected organizations, in order to implement this fix, you have to have a technician physically touch the computer and with administrative privileges delete this one file, tiny little file, one file only, but they have to have a physical hands on the machine to delete that file. You can't do that remotely. So we've talked to organizations that are having their remote employees, you know, FedEx their laptops in if it got broken, or servers and things like that. So that's why it's going to take so long. And you know this this update isn't It's simple. Once you get your hands on a machine, it might take fifteen twenty minutes only to do that. But if you've got thousands of machines and you've got to do this for you're going to prioritize your critical systems first, of course. But to get through thousands of machines, that's what's going to take weeks or potentially longer.

Yes, someone remarked online today that you know, this is this is the best malware of the year, you know, and it was delivered by by CrowdStrike. You know, it has essentially the same effect as ransomware does you know a lot of times when we when we write about ransomware cases, we'll talk about, you know, the recovery time will typically take several weeks to a month, and maybe two months or longer. We're looking essentially at that for this incident, you know, according to folks that we've been talking to. And the reason for that is simple. We work in kind of a remote work era. Now, not everybody is in an office where they have their computers, and unfortunately, for these affected organizations, in order to implement this fix, you have to have a technician physically touch the computer and with administrative privileges delete this one file, tiny little file, one file only, but they have to have a physical hands on the machine to delete that file. You can't do that remotely. So we've talked to organizations that are having their remote employees, you know, FedEx their laptops in if it got broken, or servers and things like that. So that's why it's going to take so long. And you know this this update isn't It's simple. Once you get your hands on a machine, it might take fifteen twenty minutes only to do that. But if you've got thousands of machines and you've got to do this for you're going to prioritize your critical systems first, of course. But to get through thousands of machines, that's what's going to take weeks or potentially longer.

It's not just control all delete I guess. Okay, So, Mandy, So what's changed now in our world because of this?

It's not just control all delete I guess. Okay, So, Mandy, So what's changed now in our world because of this?

Well, so from a stock perspective, I would say, you know, CrowdStrike was a darling when it comes to the software company's twenty times zv DO sales premium valuation. They couldn't do anything wrong, you know, top line growth steady. I mean the fact that it happened to them. I think they will be definitely a big brand hit that they will take from this. And look, people typically.

Well, so from a stock perspective, I would say, you know, CrowdStrike was a darling when it comes to the software company's twenty times zv DO sales premium valuation. They couldn't do anything wrong, you know, top line growth steady. I mean the fact that it happened to them. I think they will be definitely a big brand hit that they will take from this. And look, people typically.

Move no excusing them, but was it a case of them growing too fast or no?

Move no excusing them, but was it a case of them growing too fast or no?

Or no, no, they were doing everything right in terms of execution, but just goes to show there is always idiosyncratic risk when it comes to these companies, and no matter how good you are, there are little things that can take you down. And in this case, everyone is saying, you know, people will move past this outage and they'll forget it. I think the brand has taken a big hit. And I mean if it the longer it takes come to restore the systems and come out of it, I think the bigger the damage will be. And don't forget the lawsuits. I think it's critical here to think about what kind of payouts they.

Or no, no, they were doing everything right in terms of execution, but just goes to show there is always idiosyncratic risk when it comes to these companies, and no matter how good you are, there are little things that can take you down. And in this case, everyone is saying, you know, people will move past this outage and they'll forget it. I think the brand has taken a big hit. And I mean if it the longer it takes come to restore the systems and come out of it, I think the bigger the damage will be. And don't forget the lawsuits. I think it's critical here to think about what kind of payouts they.

May have and don't forget the lawsuits. It's the mantra Jamie for everything, Jamie altern to user, what are you watching for here in the days and weeks to come as we sort of see this process play out.

May have and don't forget the lawsuits. It's the mantra Jamie for everything, Jamie altern to user, what are you watching for here in the days and weeks to come as we sort of see this process play out.

We're looking for impact. We're looking to see how long it takes people to get back online and also obviously anyone trying to take advantage of this opportunities. As Jordan said, you know, it's like the malware of the year, and it's going to be something to watch. You know, there are massive reports about all kinds of compromises around the world and delays and clearly you know, how long is it going to take to get everything back online and just watching to see, you know, the reaction in terms of the sort of the scrutiny about having these critical supply chains dependent on these tiny little pieces of software and just you know what kind of comes from that and the risk involved in that.

We're looking for impact. We're looking to see how long it takes people to get back online and also obviously anyone trying to take advantage of this opportunities. As Jordan said, you know, it's like the malware of the year, and it's going to be something to watch. You know, there are massive reports about all kinds of compromises around the world and delays and clearly you know, how long is it going to take to get everything back online and just watching to see, you know, the reaction in terms of the sort of the scrutiny about having these critical supply chains dependent on these tiny little pieces of software and just you know what kind of comes from that and the risk involved in that.

Yeah, good point, Jordan, last thirty forty seconds for you, It's been a long day for you as you get into the weekend and probably looking forward to getting some sleep. What's top of mind for you, you know, next day, weekend Monday story.

Yeah, good point, Jordan, last thirty forty seconds for you, It's been a long day for you as you get into the weekend and probably looking forward to getting some sleep. What's top of mind for you, you know, next day, weekend Monday story.

I think that you know, as I mentioned, lots of it technicians are going to be trying to fix these machines throughout the weekend and then the coming weeks. I think the biggest question is going to be for CrowdStrike, whether they will you know, outline how this this really bad little piece of software made it past their quality assurance program? Was there a quality assurance program? Did anybody look at this before it went out? That's going to be the next big question.

I think that you know, as I mentioned, lots of it technicians are going to be trying to fix these machines throughout the weekend and then the coming weeks. I think the biggest question is going to be for CrowdStrike, whether they will you know, outline how this this really bad little piece of software made it past their quality assurance program? Was there a quality assurance program? Did anybody look at this before it went out? That's going to be the next big question.

You guys, rock.

You guys, rock.

Thank you so much much. Bloomberg Intelligence Senior Tech Inustry Alas Mandeep seeing Bloomberg News cybersecurity reporter Jamie Terraby and Bloomberg New Cybersecurity reporter Jordan robertson everything you need to know about that was right there.

Thank you so much much. Bloomberg Intelligence Senior Tech Inustry Alas Mandeep seeing Bloomberg News cybersecurity reporter Jamie Terraby and Bloomberg New Cybersecurity reporter Jordan robertson everything you need to know about that was right there.

I watched for the.

I watched for the.

Reboots in the lawsuits.

Reboots in the lawsuits.

Main takeaway from that t shirts hots being made.

Main takeaway from that t shirts hots being made.

Right now, you're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from two to five pm Eastern. Listen on Apple car Play and then Brout Auto with a Bloomberg Business app, or watch us live on YouTube.

Right now, you're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from two to five pm Eastern. Listen on Apple car Play and then Brout Auto with a Bloomberg Business app, or watch us live on YouTube.

One other sector of the market that we've been watching closely today is the airline group. And I'm looking at the S and P five hundred supercomposite Airlines subindustry index was down almost two percent right now, it's up about nine tenths of a percent round noon today. The FAA put out a post on x David that the global IT issue could continue to affect flights this week, and that it's still working with airlines to kind of closely keep an eye on the issue.

One other sector of the market that we've been watching closely today is the airline group. And I'm looking at the S and P five hundred supercomposite Airlines subindustry index was down almost two percent right now, it's up about nine tenths of a percent round noon today. The FAA put out a post on x David that the global IT issue could continue to affect flights this week, and that it's still working with airlines to kind of closely keep an eye on the issue.

This is airlines begin slowly resuming some operations following that widespread global software melt down. Thousands of people delayed on canceled flights, likely to cascade through the systems for days. As the FAA said airlines stocks as a whole down one point nine percent earlier today. With more on this aspect of the global it OT outage story, we welcome in long time airline industry analysts planne Becker, TD Cowan Managing Director and senior research analysts. Let me just start big picture here. This is something I think it's safe to say the airlines must have been fearing, and just give us your perspective from your vantage of how disruptive and devastating this has been for airlines.

This is airlines begin slowly resuming some operations following that widespread global software melt down. Thousands of people delayed on canceled flights, likely to cascade through the systems for days. As the FAA said airlines stocks as a whole down one point nine percent earlier today. With more on this aspect of the global it OT outage story, we welcome in long time airline industry analysts planne Becker, TD Cowan Managing Director and senior research analysts. Let me just start big picture here. This is something I think it's safe to say the airlines must have been fearing, and just give us your perspective from your vantage of how disruptive and devastating this has been for airlines.

Yeah, thanks for the question.

Yeah, thanks for the question.

So it disrupted operations as you noted, all day, and because there will be crews out of place, in aircraft out of place, it'll probably cascade into Sunday. I would say Friday and Sunday are probably the worst two days to have issues because those tend to be the days when we see the most number of people flying, especially as summer Friday. So I know the airlines were offering waivers if you wanted to change your plans, but pragmatically, if you're going on vacation today, you kind of want to go.

So it disrupted operations as you noted, all day, and because there will be crews out of place, in aircraft out of place, it'll probably cascade into Sunday. I would say Friday and Sunday are probably the worst two days to have issues because those tend to be the days when we see the most number of people flying, especially as summer Friday. So I know the airlines were offering waivers if you wanted to change your plans, but pragmatically, if you're going on vacation today, you kind of want to go.

That's.

That's.

Yeah.

Yeah.

So so I'm I guess you know, I'm hearing reports that air reports are starting to get aircraft out, airlines are getting air crept out. Yeah, obviously with massive delays. So I would say, before you go to the airport, check your flight status. But that said, they're going to do their best to get you where you want to go.

So so I'm I guess you know, I'm hearing reports that air reports are starting to get aircraft out, airlines are getting air crept out. Yeah, obviously with massive delays. So I would say, before you go to the airport, check your flight status. But that said, they're going to do their best to get you where you want to go.

Is there do you edicipate a kind of financial impact material impact here as of this out of this excuse me?

Is there do you edicipate a kind of financial impact material impact here as of this out of this excuse me?

Yeah, yeah, no, So we're going to treat it as if it was a storm, sort of a winter weather event or summer thunderstorm, and and there will be, you know, a little bit of an impact for sure, but we're early enough in.

Yeah, yeah, no, So we're going to treat it as if it was a storm, sort of a winter weather event or summer thunderstorm, and and there will be, you know, a little bit of an impact for sure, but we're early enough in.

The quarter that they'll be able to recover.

The quarter that they'll be able to recover.

And also, since almost three million people are traveling on Fridays and Sundays these days, if you're starting your vacation, you're going to still persevere. And if you're ending your vacation, you obviously have to come home and seeing with a business trip, if you're ending a business trip, you have to come home. Not a lot of business trips start on Fridays.

And also, since almost three million people are traveling on Fridays and Sundays these days, if you're starting your vacation, you're going to still persevere. And if you're ending your vacation, you obviously have to come home and seeing with a business trip, if you're ending a business trip, you have to come home. Not a lot of business trips start on Fridays.

Fair enough, the good ones, Helena, I was thinking that far.

Fair enough, the good ones, Helena, I was thinking that far.

Actually Farnborough starts Monday.

Actually Farnborough starts Monday.

There you go.

There you go.

Trips that started on a Friday or Saturday.

Trips that started on a Friday or Saturday.

I'm not going this year, but a lot of my friends we're leaving tonight.

I'm not going this year, but a lot of my friends we're leaving tonight.

A few extra days in London, you know. I was just in Atlanta and while waiting for my plan, I looked over and I love when that there was a dot matrix printer at the gate. And I'm always so amazed at the longevity of the dot matrix printer, particularly in airports. But I bring this up to say, how old are these systems, how outmoded are these systems. If we're to step back and look at any kind of broader takeaways of what's happened here, does it say anything about how good this infrastructure is. We were talking earlier with men deep Singh just about how people are running all kinds of versions of Windows don't have they're running Windows ninety five. But no one's on the same thing or the most modern thing and I always feel that, particularly acutely when I'm at the airport. It feels like the systems that a lot of these airlines are using are pretty outmoded.

A few extra days in London, you know. I was just in Atlanta and while waiting for my plan, I looked over and I love when that there was a dot matrix printer at the gate. And I'm always so amazed at the longevity of the dot matrix printer, particularly in airports. But I bring this up to say, how old are these systems, how outmoded are these systems. If we're to step back and look at any kind of broader takeaways of what's happened here, does it say anything about how good this infrastructure is. We were talking earlier with men deep Singh just about how people are running all kinds of versions of Windows don't have they're running Windows ninety five. But no one's on the same thing or the most modern thing and I always feel that, particularly acutely when I'm at the airport. It feels like the systems that a lot of these airlines are using are pretty outmoded.

Yeah, you know, that's another good observation actually, because Southwest was one of the least impacted airlines today and as most people know, they have one of the oldest systems out there. So thinking about it over the years that and you pointed out, I've been doing this a long time. Airlines were early adopters of technology, and then because of all the issues they had and the bankruptcy filings in the last no it's two decades ago. It's just kind of shocking. But with all those issues, they weren't able to necessarily keep up, and they've spent the last four or five years, especially using the time in the pandemic to start upgrading their systems. And so I know that most of the airlines and a lot of the airports were caught out by it. But you know, in fairness to them, they're doing everything they can to push information to the customer. I think United is probably on the leading edge of this. They rolled out earlier this month, the traffic the weather app that they're using to show you because it's sunny where you are and it's sunny where you're going, but there's thundersperms in between. So they're pushing that to people's cell phones now, and they're doing their best to keep up and get ahead of technology. But to your point, some of the systems are just slow to be updated, on the dot matrix printer being one of them.

Yeah, you know, that's another good observation actually, because Southwest was one of the least impacted airlines today and as most people know, they have one of the oldest systems out there. So thinking about it over the years that and you pointed out, I've been doing this a long time. Airlines were early adopters of technology, and then because of all the issues they had and the bankruptcy filings in the last no it's two decades ago. It's just kind of shocking. But with all those issues, they weren't able to necessarily keep up, and they've spent the last four or five years, especially using the time in the pandemic to start upgrading their systems. And so I know that most of the airlines and a lot of the airports were caught out by it. But you know, in fairness to them, they're doing everything they can to push information to the customer. I think United is probably on the leading edge of this. They rolled out earlier this month, the traffic the weather app that they're using to show you because it's sunny where you are and it's sunny where you're going, but there's thundersperms in between. So they're pushing that to people's cell phones now, and they're doing their best to keep up and get ahead of technology. But to your point, some of the systems are just slow to be updated, on the dot matrix printer being one of them.

Oh my god, I want a new headline on a story, Well, the dot matrix printer aside. I mean, it's safe to say though increasingly, you know, there is a lot of technology still. Though when it comes to the airline industry, do you anticipate I mean that we're going to see more incidents like this potentially.

Oh my god, I want a new headline on a story, Well, the dot matrix printer aside. I mean, it's safe to say though increasingly, you know, there is a lot of technology still. Though when it comes to the airline industry, do you anticipate I mean that we're going to see more incidents like this potentially.

Well I don't.

Well I don't.

I'm hoping not, of course, But it seems like there are always issues that aren't necessarily their fault, that they're a victim, and they weren't the only ones, right, I mean, you guys have been talking about this all day. There have been other industries. Banking was very affected. I know when I locked on this morning, I didn't have any issues, but it was just an accident of timing. By the I was a little late this morning, so by the time I locked on, the issues had been resolved within our firm. But in general, I think the industry is going to continue to invest in technology and they're going to use every tool available to try to keep their aircraft running on time. Obviously is safe operation and so on, and so will these incidents is continue to occur, of course, because it's not only airlines that are always affected.

I'm hoping not, of course, But it seems like there are always issues that aren't necessarily their fault, that they're a victim, and they weren't the only ones, right, I mean, you guys have been talking about this all day. There have been other industries. Banking was very affected. I know when I locked on this morning, I didn't have any issues, but it was just an accident of timing. By the I was a little late this morning, so by the time I locked on, the issues had been resolved within our firm. But in general, I think the industry is going to continue to invest in technology and they're going to use every tool available to try to keep their aircraft running on time. Obviously is safe operation and so on, and so will these incidents is continue to occur, of course, because it's not only airlines that are always affected.

There are other industries.

There are other industries.

But in as long as we all rely on so much technology, we're going to be exposed. So I don't think there's anything you can do about that. But when you think about the millions of flights that we have on a monthly basis, on an annual basis, the system is still working pretty well and the industry is still investing. I think each of the big airlines probably invests close to a billion dollars a year in technology, and then above and beyond what they invest in in in aircraft cutbacks.

But in as long as we all rely on so much technology, we're going to be exposed. So I don't think there's anything you can do about that. But when you think about the millions of flights that we have on a monthly basis, on an annual basis, the system is still working pretty well and the industry is still investing. I think each of the big airlines probably invests close to a billion dollars a year in technology, and then above and beyond what they invest in in in aircraft cutbacks.

So I don't think that's going to change.

So I don't think that's going to change.

All right, We're gonna leave it there, Hey, listen, thanks so much for carving out some times. Have a great week and always good to check in with. Clane Becker. She's managing director, Senior research analyst Ever at td Cowan joining us in New York City. I'm looking at airlinestocks, David.

All right, We're gonna leave it there, Hey, listen, thanks so much for carving out some times. Have a great week and always good to check in with. Clane Becker. She's managing director, Senior research analyst Ever at td Cowan joining us in New York City. I'm looking at airlinestocks, David.

They're actually as.

They're actually as.

A group up about one.

A group up about one.

How about that treating it like a storm. I thought, that's my big takeaway from that, saying this is kind of an anomaly.

How about that treating it like a storm. I thought, that's my big takeaway from that, saying this is kind of an anomaly.

For I feel like things are just bouncing back so quickly.

For I feel like things are just bouncing back so quickly.

You're listening to the Bloomberg Business Week podcast. Listen live each weekday starting at two pm Eastern on applecar Play and Android Auto with the Bloomberg Business app. You can also listen live on Amazon Alexa from our flagship New York station, Just Say Alexa playing Bloomberg eleven thirty.

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As we continue our coverage at the global IT outage, Hey listen. One other area that we were thinking about looking at and it seemed to be impacted was retail. There was a story in the Bloomberg Starbucks online system order ahead on mobile apps appeared to be down this morning, so workers were having to actually take orders by hand.

As we continue our coverage at the global IT outage, Hey listen. One other area that we were thinking about looking at and it seemed to be impacted was retail. There was a story in the Bloomberg Starbucks online system order ahead on mobile apps appeared to be down this morning, so workers were having to actually take orders by hand.

David, take orders by hand. Other reports mentioned grocery stores, retailer's, fast food giants affected around the world. I think I saw one Blomberg News article at a hotel in Hong Kong, they were checking people in my hand, which is actually see a big corporate hotel. Do you know what's Yeah? I think that's just just you know, digress a little bit. What gives me the most pause is just to think through, like in our line of work and other lines of work, what you have, what would you have to do if you weren't able to get online or get access to yourself.

David, take orders by hand. Other reports mentioned grocery stores, retailer's, fast food giants affected around the world. I think I saw one Blomberg News article at a hotel in Hong Kong, they were checking people in my hand, which is actually see a big corporate hotel. Do you know what's Yeah? I think that's just just you know, digress a little bit. What gives me the most pause is just to think through, like in our line of work and other lines of work, what you have, what would you have to do if you weren't able to get online or get access to yourself.

I always say this to my husband because increasingly, like all of our systems are online, like turning on lights, turning on this, turning on that, and I'm like, what happens like as things go down a kind of our world?

I always say this to my husband because increasingly, like all of our systems are online, like turning on lights, turning on this, turning on that, and I'm like, what happens like as things go down a kind of our world?

Stop the bloomberg performing without missing a beat? I want to point out shamelessly.

Stop the bloomberg performing without missing a beat? I want to point out shamelessly.

No, all right, so let's talk a little bit about what's going on in the retail world. Nikki Bairtt is with us. She's vice president of retail Innovation at the retail technology solutions company APTOS. They work with companies from CROCS, callhon to LLB and Michael Cores. Nikki joining us from Denver, Colorado. Nikki, good to have you here with uh, David and myself. I was going to say Tim and myself, so sorry about that, Like a Robot, David and myself, how are you good?

No, all right, so let's talk a little bit about what's going on in the retail world. Nikki Bairtt is with us. She's vice president of retail Innovation at the retail technology solutions company APTOS. They work with companies from CROCS, callhon to LLB and Michael Cores. Nikki joining us from Denver, Colorado. Nikki, good to have you here with uh, David and myself. I was going to say Tim and myself, so sorry about that, Like a Robot, David and myself, how are you good?

Good? Good?

Good? Good?

Definitely watching all the news roll in about the outage myself.

Definitely watching all the news roll in about the outage myself.

I am curious. You guys work with a wide swath of the retail group. What are you hearing from the retail world in regards to the outage.

I am curious. You guys work with a wide swath of the retail group. What are you hearing from the retail world in regards to the outage.

Yeah, it's really been kind of all over the place.

Yeah, it's really been kind of all over the place.

Like from our perspective, it's been a very limited impact, and it's mostly up to kind of the configuration and the setup of our clients, the choices that they've made, as opposed to like our ability to deliver solutions. So, you know, we definitely with point of sale in particular, you really have to think about how you handle things when things go down and whether you've got to pull out the calculator and the notepad in order to figure things out. And so, you know, we really have focused on that offline resiliency. Even if the store had that kind of trouble, we'd still be able to transact. That's that's a really important part of delivering point of sales solutions these days.

Like from our perspective, it's been a very limited impact, and it's mostly up to kind of the configuration and the setup of our clients, the choices that they've made, as opposed to like our ability to deliver solutions. So, you know, we definitely with point of sale in particular, you really have to think about how you handle things when things go down and whether you've got to pull out the calculator and the notepad in order to figure things out. And so, you know, we really have focused on that offline resiliency. Even if the store had that kind of trouble, we'd still be able to transact. That's that's a really important part of delivering point of sales solutions these days.

Nikki, I wonder what happens when you have an event like this to the trust that consumers have in the businesses that they're dealing with with the retailers that they're transacting with. Do they take a pause? How do retailers kind of combat that, you know, acknowledging the fact that a lot of them are using this kind of third party endpoint software to keep their systems secure. Of course, by doing that, acknowledging the fact that, like other companies are in their systems making sure that the systems are secure, I imagine that there's a fine line to tow there for these companies.

Nikki, I wonder what happens when you have an event like this to the trust that consumers have in the businesses that they're dealing with with the retailers that they're transacting with. Do they take a pause? How do retailers kind of combat that, you know, acknowledging the fact that a lot of them are using this kind of third party endpoint software to keep their systems secure. Of course, by doing that, acknowledging the fact that, like other companies are in their systems making sure that the systems are secure, I imagine that there's a fine line to tow there for these companies.

Yeah, you know, I think we see a lot from like the data breaches for example, that companies take kind of an immediate hit, but when they kind of go through their rehab, their public rehab, then consumers come back. So whether that's fortunately or unfortunately, I'm not sure what to say about that. But consumer's memory tends to be pretty short. So unless it is repeated issues, or unless those issues are so egregious that you know, it wipes out everybody's bank account, it'll come back. I don't really think it has a huge long term impact on consumers trustticularly of retailers who are taking their credit cards and making payments.

Yeah, you know, I think we see a lot from like the data breaches for example, that companies take kind of an immediate hit, but when they kind of go through their rehab, their public rehab, then consumers come back. So whether that's fortunately or unfortunately, I'm not sure what to say about that. But consumer's memory tends to be pretty short. So unless it is repeated issues, or unless those issues are so egregious that you know, it wipes out everybody's bank account, it'll come back. I don't really think it has a huge long term impact on consumers trustticularly of retailers who are taking their credit cards and making payments.

Hey, I do wonder to Nikki, any of your systems you guys at your company that were impacted.

Hey, I do wonder to Nikki, any of your systems you guys at your company that were impacted.

No, we had very very limited impact. Yeah.

No, we had very very limited impact. Yeah.

I think we had a few customers who had some minor issues with some back office computers in stores themselves, but it wasn't from like our solutions and how they're delivered. It was really from their own use of the technologies that were impacted.

I think we had a few customers who had some minor issues with some back office computers in stores themselves, but it wasn't from like our solutions and how they're delivered. It was really from their own use of the technologies that were impacted.

How are you guys though, What are the discussions you're having at your company though because of what happened and maybe thinking about the different strategies or protecting the solutions that you provide to make sure nothing like this happens in the future.

How are you guys though, What are the discussions you're having at your company though because of what happened and maybe thinking about the different strategies or protecting the solutions that you provide to make sure nothing like this happens in the future.

Yeah, we're very very active.

Yeah, we're very very active.

We have multiple people and we have a critical response team to really jump on all of those things whenever something like that happens. I think, you know, we definitely spend a lot of our time preaching on it. Industry best practices don't auto update things you might want to, like pause before you auto up eight. But it's hard with security because some of those things are so urgent that you almost do want to turn on the auto update. But when you do things like that, then if there's anything that goes wrong, then you aren't doing anything to stop it and you've got to roll it all back. So we spend a lot of time really focusing on kind of it best practices to help protect yourself from some of those automated things that happen as much as possible.

We have multiple people and we have a critical response team to really jump on all of those things whenever something like that happens. I think, you know, we definitely spend a lot of our time preaching on it. Industry best practices don't auto update things you might want to, like pause before you auto up eight. But it's hard with security because some of those things are so urgent that you almost do want to turn on the auto update. But when you do things like that, then if there's anything that goes wrong, then you aren't doing anything to stop it and you've got to roll it all back. So we spend a lot of time really focusing on kind of it best practices to help protect yourself from some of those automated things that happen as much as possible.

Nick, you want to step back and just ask you sort of what's front of mine for retailers right now? We're in mid July the school year. Yeah, sadly is around that. It does feel like I just got my kids out of school and now we're talking about back to school. But how much is that kind of the marquee item on retailer's calendars right now? How much emphasis are they placing on that and what does it mean for the sector more broadly?

Nick, you want to step back and just ask you sort of what's front of mine for retailers right now? We're in mid July the school year. Yeah, sadly is around that. It does feel like I just got my kids out of school and now we're talking about back to school. But how much is that kind of the marquee item on retailer's calendars right now? How much emphasis are they placing on that and what does it mean for the sector more broadly?

Yeah, absolutely, it's definitely important. We have some retailers that like normally there's from a technology perspective, a holiday freeze, right so starting in mid October, maybe they won't have any changes that get rolled out to stores because they don't want to impact their ability to deliver on the holiday season. Well, we have some retailers that also do that same blackout period for back to school. It's that important to them and they do not want anything that will impact that. So it's definitely become probably the second most critical holiday event for retails. Not to call it a holiday, because I'm sure kids don't think that, but it's on that level of holiday spending.

Yeah, absolutely, it's definitely important. We have some retailers that like normally there's from a technology perspective, a holiday freeze, right so starting in mid October, maybe they won't have any changes that get rolled out to stores because they don't want to impact their ability to deliver on the holiday season. Well, we have some retailers that also do that same blackout period for back to school. It's that important to them and they do not want anything that will impact that. So it's definitely become probably the second most critical holiday event for retails. Not to call it a holiday, because I'm sure kids don't think that, but it's on that level of holiday spending.

I don't know. My daughter kind of enjoyed all the back to school shopping. It felt like a holiday. It felt like Christmas like ten times over. To be quite honest with you, Hey, having said that, you know you do. Guys, you have a great window into the retail group, which we know how important the consumers to the economy.

I don't know. My daughter kind of enjoyed all the back to school shopping. It felt like a holiday. It felt like Christmas like ten times over. To be quite honest with you, Hey, having said that, you know you do. Guys, you have a great window into the retail group, which we know how important the consumers to the economy.

What would you say that?

What would you say that?

What are you hearing from most retailers how things are going, because we keep talking about how consumers are looking for value.

What are you hearing from most retailers how things are going, because we keep talking about how consumers are looking for value.

Yeah, I think that is definitely very much at play. For sure, the back to school spending really kicked off earlier than ever this year, and I think we saw that in consumer surveys as well. We're seeing it in the stores. Consumers are shopping early, but they're shopping early looking for those deals. So I think there's the you know, the whole Amazon Prime days and all of the retailers like Target and Macy's and Walmart who kind of piled on around those that Prime week. You know, they all are trying to take advantage of the fact that consumers are shopping earlier for back to school to kind of get in front of those deal seekers. But that said, I think most of them are really trying to cherry pick up front and then also trying to look for those deals.

Yeah, I think that is definitely very much at play. For sure, the back to school spending really kicked off earlier than ever this year, and I think we saw that in consumer surveys as well. We're seeing it in the stores. Consumers are shopping early, but they're shopping early looking for those deals. So I think there's the you know, the whole Amazon Prime days and all of the retailers like Target and Macy's and Walmart who kind of piled on around those that Prime week. You know, they all are trying to take advantage of the fact that consumers are shopping earlier for back to school to kind of get in front of those deal seekers. But that said, I think most of them are really trying to cherry pick up front and then also trying to look for those deals.

As they get towards the end of the season.

As they get towards the end of the season.

Which for back to school is a little bit more challenging for retailers because it's not like there's one day like Christmas Day, where you have a deadline and you know, like, if you don't hit this day, it's over. For back to school, it kind of spreads across the end of August, beginning of September, sometimes even as late as mid September, so there are more opportunities I think for consumers to kind of spread that spend out a.

Which for back to school is a little bit more challenging for retailers because it's not like there's one day like Christmas Day, where you have a deadline and you know, like, if you don't hit this day, it's over. For back to school, it kind of spreads across the end of August, beginning of September, sometimes even as late as mid September, so there are more opportunities I think for consumers to kind of spread that spend out a.

Little bit if they need to.

Little bit if they need to.

Very quickly. Here, I wonder if you're seeing signs of any strain on consumers, and so we talk about so often is what the Fed's thinking and what it might do and sort of how its war on high inflation is affecting consumers. Are you seeing them strained and our companies doing anything particularly interesting as a result.

Very quickly. Here, I wonder if you're seeing signs of any strain on consumers, and so we talk about so often is what the Fed's thinking and what it might do and sort of how its war on high inflation is affecting consumers. Are you seeing them strained and our companies doing anything particularly interesting as a result.

Yeah, the promotions are back on deck for sure. You know, we saw it earlier in the year with.

Yeah, the promotions are back on deck for sure. You know, we saw it earlier in the year with.

Some of the restaurants fast food kind of offering bringing back their meal deals and things like that. And I think, you know, my company focuses on apparel companies very much so the fashion industry, and we've seen the same deal that you've got to be pretty pretty targeted in your promotions and you've definitely got to offer value in order to get customers. I think one of the things with back to school in particular is that it is a very unique store traffic opportunity. So, as you mentioned Carol, right, you want this to be a really great experience for your kid. You want to take them, you want to have them pick the backpack, you want them to be emotionally invested in the new school year. And that's a particular opportunity to take advantage of that traffic both in the moment, but also to put together a really great experience that could lead the holiday spending DOW.

Some of the restaurants fast food kind of offering bringing back their meal deals and things like that. And I think, you know, my company focuses on apparel companies very much so the fashion industry, and we've seen the same deal that you've got to be pretty pretty targeted in your promotions and you've definitely got to offer value in order to get customers. I think one of the things with back to school in particular is that it is a very unique store traffic opportunity. So, as you mentioned Carol, right, you want this to be a really great experience for your kid. You want to take them, you want to have them pick the backpack, you want them to be emotionally invested in the new school year. And that's a particular opportunity to take advantage of that traffic both in the moment, but also to put together a really great experience that could lead the holiday spending DOW.

I'm just gonna say, Niki, what I wanted it to be is one store eno.

I'm just gonna say, Niki, what I wanted it to be is one store eno.

Like you were going to pick that backpack, you were going to fill it.

Like you were going to pick that backpack, you were going to fill it.

And no, I have to have this one.

And no, I have to have this one.

No, this one's just fine, Nikki, thanks so much. Get to check in with you, Nicki Baird. She's vice president of Retail Innovation. Over the app doos.

No, this one's just fine, Nikki, thanks so much. Get to check in with you, Nicki Baird. She's vice president of Retail Innovation. Over the app doos.

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You are listening and watching Bloomberg Business become Carol Master. Timstenbeck is off with me as David Gora, and we've got about eighteen minutes left in today's trading session, bouncing around off our loads of the session, but too far off. And you've got most of the major industry groups in the S and P five hundred and nine out of eleven are lower in today's trade. So a lot going on. As we keep saying, I feel like a little bit of a broken record. I'm very happy it's Friday, getting ready for my glass of red wine. So let's get to it. Our drive to the closed. Tracy mcmillion is with US, head of Global Asset Allocation Strategy over at Wells Fargo Investment Institute, joining us from Winston Salem, North Carolina. Tracy, There is so much that we could start with, whether it's the presidential race, whether it's the global IT outage, whether it's earnings fed policy. What matters most to you right now on this Friday afternoon.

You are listening and watching Bloomberg Business become Carol Master. Timstenbeck is off with me as David Gora, and we've got about eighteen minutes left in today's trading session, bouncing around off our loads of the session, but too far off. And you've got most of the major industry groups in the S and P five hundred and nine out of eleven are lower in today's trade. So a lot going on. As we keep saying, I feel like a little bit of a broken record. I'm very happy it's Friday, getting ready for my glass of red wine. So let's get to it. Our drive to the closed. Tracy mcmillion is with US, head of Global Asset Allocation Strategy over at Wells Fargo Investment Institute, joining us from Winston Salem, North Carolina. Tracy, There is so much that we could start with, whether it's the presidential race, whether it's the global IT outage, whether it's earnings fed policy. What matters most to you right now on this Friday afternoon.

You're right, Carol, there is a lot going on right now, and I think for us, the most important thing is to continue to advise investors to look at their portfolios and those stocks that have outperformed the most so much so far this year, and that's going to be stocks and information technology, communication services. Take games there and reallocate into those sectors that should benefit as due to the earnings recovery as that continues through the end of the year. So those are sectors like industrials, energy, materials, healthcare, and financials.

You're right, Carol, there is a lot going on right now, and I think for us, the most important thing is to continue to advise investors to look at their portfolios and those stocks that have outperformed the most so much so far this year, and that's going to be stocks and information technology, communication services. Take games there and reallocate into those sectors that should benefit as due to the earnings recovery as that continues through the end of the year. So those are sectors like industrials, energy, materials, healthcare, and financials.

You mentioned information technology. We were talking about Nvidia kind of recentrough road that it's been on. Something that's always of endless curiosity to me is when that enthusiasm for AI moves to smaller companies in the space and we see kind of secondary and tertiary effects of that. Are you seeing that when you make those recommendations, Are you suggesting any of that money go into other AI companies? Where are you really kind of making a more counseling, a more defensive play.

You mentioned information technology. We were talking about Nvidia kind of recentrough road that it's been on. Something that's always of endless curiosity to me is when that enthusiasm for AI moves to smaller companies in the space and we see kind of secondary and tertiary effects of that. Are you seeing that when you make those recommendations, Are you suggesting any of that money go into other AI companies? Where are you really kind of making a more counseling, a more defensive play.

Yeah, so you're right. AI has certainly driven a lot of the returns so far the year, and it's been the megacap Ai companies, and you know, as AI continues to proliferate and to the build out continues, we think that it will the benefits to investors will move from that direct investment in technology names to peripheral types of sectors that should benefit as data centers are built out, as energy use is electrification you know, continues to be needed. So we do think that that's kind of the next play, and that's where we're asking investors to focus their assets.

Yeah, so you're right. AI has certainly driven a lot of the returns so far the year, and it's been the megacap Ai companies, and you know, as AI continues to proliferate and to the build out continues, we think that it will the benefits to investors will move from that direct investment in technology names to peripheral types of sectors that should benefit as data centers are built out, as energy use is electrification you know, continues to be needed. So we do think that that's kind of the next play, and that's where we're asking investors to focus their assets.

Having said that, Tesla reports next week, Alphabet reports next week. So if we get I'm thinking about Alphabet in particular, some up eating numbers from Alphabet, do you rethink kind of that big tech story? Because I feel like just when everybody says we're done with big tech, all of a sudden something happens and we all go roaring. Are you see investors moving a lot of money back into the sector. So I don't know, how do you balance that?

Having said that, Tesla reports next week, Alphabet reports next week. So if we get I'm thinking about Alphabet in particular, some up eating numbers from Alphabet, do you rethink kind of that big tech story? Because I feel like just when everybody says we're done with big tech, all of a sudden something happens and we all go roaring. Are you see investors moving a lot of money back into the sector. So I don't know, how do you balance that?

Yeah, So the way that we're playing that right now is to be neutral technology and what that means for US large cap investor who is neutral the index, that's about one third of their US large cap exposure. So that's a lot of exposure to technology. We just wouldn't be overweighted here. And because these stocks have done so well, that's exactly what we're seeing and a lot of portfolios is that it's it's more heavily weighted than the index. So that's where we're saying, pair some pair some of beholdings, pair some gains, and reallocate to other areas. Not that we don't see technology continuing to perform well, it's just that there's a lot of risk there when it gets when the performance gets as conscience concentrated as it's been so far this year.

Yeah, So the way that we're playing that right now is to be neutral technology and what that means for US large cap investor who is neutral the index, that's about one third of their US large cap exposure. So that's a lot of exposure to technology. We just wouldn't be overweighted here. And because these stocks have done so well, that's exactly what we're seeing and a lot of portfolios is that it's it's more heavily weighted than the index. So that's where we're saying, pair some pair some of beholdings, pair some gains, and reallocate to other areas. Not that we don't see technology continuing to perform well, it's just that there's a lot of risk there when it gets when the performance gets as conscience concentrated as it's been so far this year.

Tracey Carroll start off asking you what's top of mind for you? Let me turn that question on its head, and what's top of mind for your clients when they come in to you worrying about what they should be doing, Curious what you would advise them to do, buy and large, what are they asking about, what are they saying and sort of how often do you have to set them straight? So what's the most common kind of misconception that the investors that your clients have right now, I'd.

Tracey Carroll start off asking you what's top of mind for you? Let me turn that question on its head, and what's top of mind for your clients when they come in to you worrying about what they should be doing, Curious what you would advise them to do, buy and large, what are they asking about, what are they saying and sort of how often do you have to set them straight? So what's the most common kind of misconception that the investors that your clients have right now, I'd.

Say, right now it's probably wanting to reallocate based on the political environment, wanting to reallocate based on who is leading in the polls. And we are telling investors that they should not make significant changes to their portfolios based on what is happening right now in the polls, that it's much too soon to make any changes to the portfolio. We've certainly seen some very extraordinary headlines coming out of this race so far, lots of twists and turn it's a long way to November. We just think it's speculative at this point to be investing based on what might happen at that time.

Say, right now it's probably wanting to reallocate based on the political environment, wanting to reallocate based on who is leading in the polls. And we are telling investors that they should not make significant changes to their portfolios based on what is happening right now in the polls, that it's much too soon to make any changes to the portfolio. We've certainly seen some very extraordinary headlines coming out of this race so far, lots of twists and turn it's a long way to November. We just think it's speculative at this point to be investing based on what might happen at that time.

Tracy, is there a point though in the race, I don't know, two weeks out, a month out, like where you really look at the polls and you say, all right, guys, it's you know, hey, clients, it is time to make some adjustments.

Tracy, is there a point though in the race, I don't know, two weeks out, a month out, like where you really look at the polls and you say, all right, guys, it's you know, hey, clients, it is time to make some adjustments.

So we probably would want to wait until we get more confirmation about you know, who's at the top at the you know, who is the presidential candidate who has been elected, and then we'd want to see how Congress also has has shaped up after the election. So it's really the total picture that may help us to direct clients to certain sectors, certain industries that might benefit more based on what policies are likely to come to fruition.

So we probably would want to wait until we get more confirmation about you know, who's at the top at the you know, who is the presidential candidate who has been elected, and then we'd want to see how Congress also has has shaped up after the election. So it's really the total picture that may help us to direct clients to certain sectors, certain industries that might benefit more based on what policies are likely to come to fruition.

Just have a couple seconds left here. I wonder when you look at the wide swath of economic data, what's most important for you is you kind of game out what the FED might do sor where things are headed. What do you pay closest attention to.