If, as I expect, 2012 is a difficult year for the economy it's hard to see how a new administration and a new Congress could rally around a credible plan to boost short-term growth and tackle the deficit even in early 2013.

Further credit downgrades are likely. Fitch placed the country on negative credit watch late last month on "declining confidence that timely fiscal measures necessary to place U.S. public finances on a sustainable path and secure the 'AAA' sovereign rating will be forthcoming."

And even before we get that far, we face a minefield of unresolved issues in 2012, including the expiration of the Bush tax cuts (worth $4.6 trillion over 10 years), the expiration of payroll tax cuts and extended unemployment benefits, and the very likely possibility that the new, raised debt limit ($2.1 trillion added since August, for a total of $16.4 trillion) is hit late next year.

That sets the stage for another contentious battle over the borrowing limit like the one seen last summer, and such a fight could very well shut down the government just before the polls open in November.

Batten down your portfolio

For investors, my advice remains the same: It's time for skepticism, caution and defensiveness as we fall deeper into what looks to be a bear market that started in May.

How much downside risk is there? Merrill Lynch/Bank of America equity strategists calculate that since 1929, earnings fall by an average of 29% in a bear market, while large-cap stocks lose 41%. With the Standard & Poor's 500 Index ($INX) already down 7.6% from its springtime high, we could be looking at an additional 30%-plus decline before all is said and done.

It could be worse: Consider what happened to the ancient Mesoamericans, wiped out by European guns, germs and steel. Assuming 2012 isn't the end of the world, we have only government debt to worry about.

Stocks mentioned in this article include Walgreen (WAG, news), Tiffany (TIF, news), Amazon.com (AMZN, news) and Darden Restaurants (DRI, news).

At the time of publication, Anthony Mirhaydari did not own or control shares of any company mentioned in this column.

Be sure to check out Anthony's new money management service, Mirhaydari Capital Management, and his investment newsletter, the Edge. A free, two-week trial subscription to the newsletter has been extended to MSN Money readers. Click here to sign up. Mirhaydari can be contacted at anthony@edgeletter.com and followed on Twitter at @EdgeLetter. You can view his current stock picks here. Feel free to comment below.