The rising fear of a global recession emanating from the big interest rate rises in the US and other smaller countries to beat down inflation and the negative consequences of the Ukraine war (such as spiking petrol and energy prices) has created some odd consequences.

Like what?

Well, try the AFR telling us to get ready for lower petrol prices and the SMH suggesting that it’s too early to expect petrol price relief. It won’t surprise you to learn that oil companies have learnt from banks to be fast increasers but slow price decreasers! Yesterday we saw all four big banks passing on the full 0.5% interest rate rise, following Tuesday’s cash rate hike from the RBA.

This will bump up the repayments on a $450,000 loan by $119 a month and surprise, surprise, some bank term deposit rates have also been increased by 0.5%.

Meanwhile, yesterday we saw Wall Street react to recession fears by selling quality miners like BHP to buy recently smashed-up tech stocks.

But why?

Well, in a recession-affected world, interest rates would fall. Already we’ve seen bond markets cut down their yields/interest rates. That’s good news for tech companies whose share prices are crazily dependent on what interest rates are doing. Of course, I’m happy to see that my tech stock prices are improving but I’m not convinced about the rationality and good sense of the way stock markets value tech companies.

But it is what it is and I’m powerless to change what drives stock markets, so I deal with it by sticking to what I believe is great investing advice.

In fact, after looking at the less-than-impressive year for investing only yesterday, Shane Oliver, AMP’s chief economist and head of investment strategy, reminded us of this important lesson:

“Some key things for investors to keep bearing in mind are that: share pullbacks are healthy and normal; selling shares after a fall locks in a loss; share pullbacks provide opportunities for investors to buy them more cheaply; and to avoid getting thrown off a long-term investment strategy it’s best to turn down the noise”.

And he said that just after reminding us that shares could fall further this year, and it wouldn’t surprise me either, with company reporting season starting in August, the latest inflation number for Australia coming out in late July and even the US job numbers on Friday could do anything to stocks on Wall Street.

Think about it: on Tuesday the US stock market was rattled by recession fears but the impact of lowering interest rates led them to buy tech stocks. And we followed suit, with Tyro up 9.46%, EML up 10.51%, Megaport 14.03% higher and Xero putting on 6.65% all in one day!

Of course, you can’t trust day-to-day stock price moves, but after you take out these ups and downs, the key lesson is that eventually stocks on the outer (provided they’re good companies) will be on the inner and their stock prices will rise. You just have to be patient and sure they are quality businesses. And remember that the double-digit fall in the stock market over the financial year was driven by inflation, recession and too many interest rate rise fears. However, these fears won’t last forever. When they dissipate, stock market sentiment will go from excessively negative to excessively positive. It always does that.

But what about the conflict on what will happen to petrol prices?

The AFR’s Jacob Greber told us that “West Texas Intermediate crude fell 10 per cent overnight, before steadying just below $US100 a barrel … [while] Citi said Brent crude could fall to $US65 by the end of the year if the US economy slides into recession”.

If that happens (and it’s not certain it will), that’s when petrol prices will really come down. And when it comes to economics, you have to remember there are lag periods before big changes deliver benefits.

It often doesn’t work that way in the other direction because fear takes over when the possible change looks like it will deliver bad news, but if the change promises good news, suspicion seems to prevail until the good stuff actually happens.

It seems to be a psychological thing that we take pessimism more seriously than optimism.

That pessimism is bound to hover around stock markets for a few months. After that, I expect we will learn that the recession fears, like the inflation fears and the fears about too many interest rate rises, will all prove to be excessive.

Stock markets will like these developments, which should take share prices higher in the December quarter, which should roll into 2023. And lower petrol prices will be a part of that story.

By the way, if we can see the end of the Ukraine war, then the good news would go on steroids and that should be a nice change for stock prices.