True, we’ve been here before. Through terrorism, war, even Katrina, the economy has shown its resilience, says Lakshman Achuthan, managing director of the Economic Cycle Research Institute, one of the nation’s leading forecasters. “A shock alone won’t cause a recession if the economy is otherwise strong,” he notes. But here’s the rub: “With the housing slowdown and subprime mess, this is the first time in a long time that we’ve had the combination of a big shock and an economy showing real signs of weakness. That combination is a recipe for recession.”

What changed? In brief, your home lost value. The air began escaping from the housing-price bubble in 2006, pressuring millions of homeowners who’d wagered that rising real estate or their own income gains would keep them ahead of their precariously high debts. Then it turned out that mortgage lenders had encouraged too many of those bad bets—and that still more financial institutions owned a piece of the problem because they’d purchased securities based on these risky loans. By last July, the ripple effects from mortgage losses hit big banks, and the stock market began to seesaw downward.

As of December, Achuthan wasn’t actually forecasting a recession—a shrinking of the economy—just slower growth. But the possibility can’t be dismissed. Morgan Stanley investment strategist David Darst pegs the chance of recession at 50 to 60 percent. Even former Federal Reserve Board chairman Alan Greenspan said at year’s end that the odds the economy will tip into recession are growing.

Such talk matters. The Consumer Confidence Index has taken a nosedive since July, and the drumbeat of doubt can make all but the coolest investor jittery. “The psychological impact of all this bad news is part of the reason we’re in a slowdown,” Achuthan observes.

What’s a person to do? Try to keep your head. “The economy is a series of ups and downs,” says Milton Ezrati, senior economist at mutual fund firm Lord Abbett. “Weathering each storm with smarts and a sense of calm is the best advice at any time.”

To help you do just that, we gathered expert advice on handling turbulent times ahead in three significant areas: Home values, the cost of borrowing, and investments.

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