Australia's banks are lumbering beasts.
Among the largest companies listed on the Australian stock exchange, when their share prices rise it's usually on a gradual incline, ticking up a little bit each day.
In the week to Thursday's close, Westpac and National Australia Bank's share price rose 22 per cent, ANZ rose 23 per cent, while the Commonwealth Bank of Australia gained a more muted 12 per cent.
For bank shares to surge like this – including shooting up 10 per cent in a single day – is unprecedented. You'd expect this from a biotech that's just announced a successful Covid-19 vaccine trial. It's all part of the Covid-inspired madness driving equity markets at the moment.
Banks are among the biggest companies on the stock market. They form large parts of just about every Australians' retirement portfolio thanks to the compulsory superannuation system. Retirees rely on their bank shares – either directly owned or in their super fund – for their regular and predictable dividends. The surge was good news for many Australians.
The banks have rallied thanks to signs that maybe the economic damage to the economy and their balance sheets is not a bad as first feared. In particular a report by a banking analyst known to generally take a pessimistic view of the sector is credited with being a key factor in the price rises. UBS analyst Jonathan Mott highlighted a string of positive economic data that has emerged over the past week suggesting the economy is performing better than first feared.
In particular, it turned out that just 3.5 million Australians or their employers received the JobKeeper wages subsidy instead of the 6.5 million the Federal Government budgeted for, that businesses which had suffered steep revenue drops could receive.
Aside from suggesting businesses aren't performing as badly as was feared, the lower take up of JobKeeper has given the government an extra A$60 billion ($64.4b). It is now considering using the funds to support more workers, providing a further boost to the economy.
Consumer spending is also being supported by the A$10.6b Australians have taken out of their retirement savings to help them through the crisis. Credit card spend and retail data have started recovering along with home auction clearance rates.
"This is all good news, and with the healthcare outcomes continuing to improve, the outlook for the economy is on the rise," UBS's Mott wrote, although he did temper his optimism by warning the economy isn't out of the woods yet.
All this good news adds up to a belief that fewer home owners and credit card holders defaulting on repayments, which means banks' profits won't be so badly affected and they will be able to restore dividends to investors.
That's the theory anyway, and one of the reasons bank stocks rose so sharply.
But Australia's banking regulator is far from convinced.
Australian Prudential Regulation Authority chairman Wayne Byres warned the assumption of an economic snap-back was "dangerously naive". He added that the "real battles for the financial sector remain ahead".
Let's not forget that Australian businesses and households have been allowed to defer A$250b in loan repayments. We don't know how many of them won't be able to repay their loans when the repayment holidays come to an end in a few months.
Lined up against delayed repayments of a quarter of a trillion dollars, the combined A$5b the Big Four banks have put aside for bad debts doesn't look so large after all.
The banks' surge last week was also about playing catch up with the rest of the share market, which had risen strongly in the past three months, leaving banks behind. Investors in other stocks had seemingly decided that coronavirus was not such a big deal after all.
The ASX 200 index fell about 36 per cent from its recent high in March to its lowest point during the coronavirus crisis. It's now just 20 per cent below that peak.
The question for investors now is how realistic is this? The market already looked overpriced compared to how much companies were earning before the Covid-19 crisis. In that light a 20 per cent drop doesn't look very steep.
Billionaire US investor Warren Buffett's famous dictum from his letter to shareholders in 1986 has been much quoted in the current crisis as investors have piled back into stocks: "We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful."
It looks as if the dial has now well and truly switched over to greed.
For now, the banks along with the rest of the share market is sitting around its highest level in close to three months.
But what happens to the Australian economy in September when the Government's economic stimulus runs out and mortgage holders and small businesses have to start repaying their loans, which have been growing even larger while they had their repayment holidays?
Will the disruption and damage wrought by coronavirus prove to be only small and temporary and will the Australian economy have enough momentum to continue on its own?
It might yet prove that the optimism driving share prices is ill-founded.