1Q26_ Quarterly Outlook Report_Final_EN - Flipbook - Page 33
T H E P LUMB LI N E | A RETU RN TO F I RS T PRI N CI PL ES
over the five years ending in 1999 coincided with annualized EPS growth exceeding 10%. A similar
dynamic could emerge as AI-driven efficiency gains broaden across the economy.
Higher margins correspond to higher earnings
5-yr annualized EPS growth
18%
16%
14%
12%
10%
8%
6%
-6%
-4%
-2%
0%
2%
4%
6%
Margin Δ over 5-yrs
Source: Bloomberg Finance LP, Scotia Wealth Management | Based on the S&P 500
Phase 3: Redistribution
The final phase is redistribution. While income inequality is not new, recent decades have seen a
structural widening in income disparities, driven in part by productivity gains that have accrued
more to capital than to labour. AI has the potential to reinforce this dynamic if compounding
productivity gains increasingly flow to capital owners, widening the gap between productivity
growth and median wage growth.
High income households capture a disproportionate share of wage gains
350
1.5% CAGR
US$ (thousands)
300
250
200
150
0.9% CAGR
0.7% CAGR
0.6% CAGR
100
50
0
1974
1981
1988
0-40th percentile
1995
Third quintile
2002
2009
Fourth quintile
2016
2023
Highest quintile
Source: Bloomberg Finance LP, Scotia Wealth Management
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