Macro Markets and Machines_The Economic and Market Transformation Driven by AI_GWM report - Flipbook - Page 12
Macro, Markets, and Machines
November 2025
Exhibit 7 – Corporate Profit Margins Have Historically Tracked Productivity Growth Prior to Globalization
3.3%
3.0%
13.9%
2.7%
10.5%
9.2%
1.9%
7.8%
6.9%
1.3%
1950-1972 1973-1994 1995-2004 2005-20192020-2025
1950-1972 1973-1994 1995-2004 2005-2019 2020-2025
U.S. nonfarm productivity (CAGR)
Avg corporate profit margins
Source: Bloomberg Finance LP; Scotia Wealth Management.
Section 2.2: Capital-Deepening Technologies May Act as a Structural Tailwind
for Equities
Looking through an investment lens, the most direct implication of AI is the effect it has on the balance
between capital and labour. AI is a capital-deepening technology with firms investing in data centres, chips, and
software rather than hiring more workers. This means that the incremental output generated accrues more to
the owners of capital (i.e., shareholders) than to workers. In economic terms, the labour share of income
declines, while the capital share rises, a trend that we have seen for several decades and one that is poised to
continue (Exhibit 8).
Exhibit 8 – The Labour and Capital Shares of Income Have Steadily Converged over Decades
70%
60%
50%
40%
30%
1960
1968
1976
1984
1992
U.S. labour share of income
2000
2008
2016
2024
U.S. capital share of income
Source: European Commission AMECO database; Scotia Wealth Management.
Scotia Wealth Management
11
