F. Scott Fitzgerald: “The rich are different than you and me.”

Ernest Hemingway: “Yes, they have more money.”

This famous exchange between two of America’s literary titans is a reminder that money is the great equalizer. You don’t have to be born into the 1% to join their ranks.

Below, I’ll steer you toward an opportunity to invest like the elite. First, let’s look at this record-setting stock market rally and what’s behind it.

One factor driving stocks higher, despite the economic recession, is a massive influx of money from the wealthiest investors. These individuals in the top socio-economic stratum have cut back on their spending, so they’re plowing the excess cash into equities. With interest rates at rock bottom levels, there aren’t a lot of appealing alternatives.

Hence the disconnect between the stock market and the economy. Although millions of average Americans are out of work, there’s still a glut of funds from high-wealth individuals making its way into the financial markets.

The major U.S. stock market indices closed mixed Thursday as follows: the Dow Jones Industrial Average (-0.29%), the S&P 500 (-0.20%), and the tech-heavy NASDAQ (+0.27%). In pre-market futures trading Friday morning, all three indices were poised to open in the red.

Investors won’t be out of the woods, until the coronavirus pandemic is contained. The expiration of emergency unemployment benefits and business loans is starting to take a toll, as the economic recovery shows signs of losing steam.

The Labor Department reported Thursday that initial filings for unemployment insurance dipped below 1 million for the first time since the virus-induced economic lows of March.

In the week ending August 8, the advance figure for seasonally adjusted initial claims was 963,000, a decrease of 228,000 from the previous week’s revised level (see chart).

The decline below the psychologically fraught level of 1 million is welcome, but the claims data also show that the pace of rehiring is tepid and unemployment remains high. Far from receding, the COVID-19 outbreak rages on.

The Commerce Department reported Friday that U.S. retail sales in July increased, but less than consensus expectations. Retail sales rose 1.2% last month after rising 8.4% in June, an indication that they’re in a downward mode. Analysts had expected an increase of 1.9% in July.

At the same time, the White House and Congress have been unable to agree on a new fiscal stimulus package. The Senate yesterday left for August recess, without a deal. I used to work as a press secretary in Congress. Take it from me. Nothing gets done in August.

Read This Story: Your Congress, Inaction…

Extended unemployment benefits expired on July 31, forcing millions of American households to tap into savings or go into deeper debt. About three-fourths of U.S. gross domestic product (GDP) is consumer spending and the dire predicament of average Americans already is showing up in the economic data.

One disturbing trend is the soaring rate of business bankruptcies. According to figures compiled by S&P Global Market Intelligence, bankruptcies in the U.S. are on track to hit the highest level in at least 10 years (see chart).

From January 1 through August 9 of this year, 424 companies announced their bankruptcy, an increase of 22% versus the same period last year and the highest level since 2010. Retailers and consumer-oriented companies were the hardest hit, a reflection of high unemployment. Many iconic retail brand names have gone belly up.

Looking toward a better year…

And yet, since its lows of March 23, the stock market has bounced back. In addition to the investing of high net worth individuals, there’s another explanation for the disconnect between the markets and the economy: Stock markets are forward looking and people are investing for the longer term, with optimistic expectations for 2021.

Watch This Video: The Market Paradox, Explained

Much of that optimism is warranted. To be sure, analysts predict a year-over-year decline in earnings per share (EPS) in the third quarter (-22.9%) and the fourth quarter (-12.8%) of 2020. However, they project a return to earnings growth in Q1 2021 (+12.9%). These figures come from FactSet, the data provider for Investing Daily.

Analysts also are raising their annual EPS estimates for 2021. During the first six months of the year, the calendar year (CY) 2021 bottom-up EPS estimate (which is an aggregation of the median 2021 EPS estimates for all the companies in the index) declined by 16.9% (to $163.38 from $196.70). Since June 30, the CY 2021 bottom-up EPS estimate has increased by 1.4% (to $165.68 from $163.38).

Also lifting Wall Street’s mood is a second quarter earnings season that has surprised on the upside. Among the S&P 500 companies that have reported so far, 83% have reported actual EPS above the mean estimate.

If 83% is the final percentage for the quarter, it will mark the highest percentage of S&P 500 companies reporting a positive EPS surprise since FactSet began tracking this metric in 2008. The current record is 81%, which occurred in Q2 2018. The information technology sector has scored the highest percentage (93%) of companies reporting earnings above estimates.

The takeaway: For a handful of mega-cap companies and for society’s most affluent, the recession is over. With sectors such as technology flush with cash and small companies in deep trouble, we’re likely to see a wave of deal-making this year that extends into 2021. Prosperous companies are lining up to make synergistic deals, by scooping up solid but struggling competitors on the cheap.

Getting a jump on the “Big Boys”…

Want to invest like the 1%? Turn to my colleague, Nathan Slaughter.

As chief investment strategist of Takeover Trader, Nathan is an expert on mergers and acquisitions and corporate deal-making.

Nathan is adept at digging up the inside data on pending takeovers. Along those lines, he’s about to go on camera to reveal a startling development. If you watch his presentation and follow his advice, you could reap huge market-beating gains.

Nathan intends to answer the most urgent questions for investors in the second half of 2020:

1. Why are CEOs at America’s most flush-with-cash companies raising even more cash right now?
2. What hidden asset class are they gearing up to invest in, at historic levels?
3. How can you beat them to the punch?

Nathan will lift the curtain on the one hidden asset that’s about to attract $4 trillion of cash from America’s richest CEOs. These insiders who occupy the upper echelon of power have pinpointed a future bonanza and they’ve decided to go “all in.” This is your chance to join them. To lock in your free spot for Nathan’s “Project Rainmaker” expose, click here now.

John Persinos is the editorial director of Investing Daily. You can reach him at: malbag@investingdaily.com