Macro Markets and Machines_The Economic and Market Transformation Driven by AI_GWM report - Flipbook - Page 3
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Macro, Markets, and Machines:
The Economic and Market Transformation Driven by AI
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The following commentary is
provided by Global
Investment Solutions and
Scotiabank Economics.
Walid Khalid, CFA | Director,
Investment Strategy
Global Investment Solutions
walid.khalid@scotiawealth.com
Juan Manuel Herrera |
Senior Economist
Global Investment Solutions and
Scotiabank Economics
juanmanuel.herrera@scotiabank.com
Rebekah Young | VP & Head of
Inclusion and Resilience Economics
Scotiabank Economics
rebekah.young@scotiabank.com
Introduction
Technological innovation has always been a driving force behind progress, unlocking productivity
gains and fuelling economic growth. The steam engine transformed transportation and
manufacturing, setting the stage for the industrial revolution. Electrification in the late 19th and
early 20th centuries changed daily life, powered factories and homes, and paved the way for new
inventions. The automobile, propelled by Henry Ford’s assembly line, revolutionized mobility and
trade by making travel and the movement of goods faster and more efficient. More recently, the
Internet connected the world like never before, accelerating communication, expanding global
commerce, and ushering in the digital age.
AI represents the latest in this broader continuum of technological progress – one that has the
potential to catalyze innovation across nearly every industry. Just as electrification enabled mass
production and the Internet paved the way for the digital economy, AI may spur technological
progress by accelerating computation and analysis. Its integration into sectors such as
biotechnology, energy systems, and advanced manufacturing may help enable faster discovery
and reduce the time required to turn ideas into real-world applications. In other words, AI has the
potential to drive a new phase of productivity growth and set the stage for the next leg of
technological transformation.
AI itself has existed in several forms for decades, from early rule-based systems to basic machine
learning. However, the AI we know today – capable of learning, adapting, and performing complex
tasks – was once the stuff of science fiction. Now, these advanced technologies are a reality,
reshaping our daily lives. From virtual assistants and personalized recommendations to
breakthroughs in medical diagnostics and autonomous vehicles, AI is already at work across a
wide range of fields. As these technologies continue to evolve and expand, they are sparking both
excitement and debate about how our world might change over the next five, 10, or 15 years.
This whitepaper examines the impact of technological innovation, powered by the rapid advances
in AI, through an economic and investment lens. We explore how these innovations could
influence key macroeconomic variables, such as GDP growth, productivity, inflation, and interest
rates, alongside their effects on the labour market, policy, and regulation. We also assess how
technology adoption is shaping corporate profits and margins, and how these changes will vary
across sectors, creating new winners and opportunities.
With the promise of substantial productivity gains, companies have invested billions into AIrelated technology, with more investment on the horizon. These trends are already affecting the
global economy, established business models, and investment portfolios. While AI has been a
focal point of these investments since the emergence of large language models (LLMs), it is part of
a far broader technological transformation that spans automation, cloud computing,
biotechnology, and clean energy that may define the next era of growth. By understanding how
these technological advances may collectively influence economic activity, corporate profitability,
and individual sectors, investors can better position portfolios to capture emerging opportunities,
manage risks, and adapt asset-allocation strategies to capitalize on this secular shift.
Scotia Wealth Management
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