Investors' optimism has returned very quickly. Too quickly.

Financial stocks have been rallying ever since March when Citigroup hinted that its trading performance in 1Q had been better than expected. The number of American banks tightening lending standards has fallen for 2 consecutive quarters. 3 months LIBOR has fallen below 1% for dollar loans, and investors in high yield bond, the riskiest form of corporate debt enjoyed returns of 11.5% in April.

In short, there seems to have been a huge shift in attitudes towards risky assets and the market seem to be in a bull rally. Furthermore, the ECB president declares on the cover of FT today that the economy has 'bottomed out'.

Yet, an observer who had woken after sleeping for the past two years would be alarmed at some other numbers. Nominal GDP in America has fallen for 2 consecutive quarters for the first time in more than half a century. Industrial production is still dropping at a double-digit annual rate in America, the euro zone, and much of Latin America and South East Asia.

Companies are still defaulting on their debts at a steady rate; 40 issuers did so in April and Moody's expects the default rate to reach 14.3% by next March.

The economic data may have improved, but only from some terrible lows. It would have been amazing, given the amount of stimulus thrown at the economy in the form of lower oil price and interest rates, quantitative easing and fiscal deficits, if there had not been some kind of rebound.

The danger is that sentiment has flickered higher rather as a dissected frog's leg will twitch when an electric current is applied. The world is still drowning in debt, unemployment is still rising, wages are stagnant and the threat of higher taxes hang over consumers. This was not a conventional downturn; it is unlikely to herald a conventional recovery.