Summer is a time for blockbuster horror flicks, and the performance of the economy and markets surely provide the basis for a gory one. Prices on the global stock markets have plunged in recent weeks.

What's going on? Europe is the immediate epicenter of trouble. The seemingly never-ending mostly Mediterranean sovereign debt problem threatens to hammer the balance sheets of European banks. The emergency meetings and temporary patches put together by shell-shocked European Union leaders are starting to backfire. Wary investors are also concerned that China's growth may be lower than reported as the Asian giant's monetary authorities try to dampen inflationary pressures.

The U.S. economy is weak, managing to eke out a mere 0.8 percent annual rate of growth in the first half. Consumers and businesses are once again battening down the hatches, hiking their savings. The bitter, needless debt-limit crisis in Washington made a worrisome situation worse, alienating investors and everyone else. The Standard & Poor's downgrade of the U.S. was a ridiculous sideshow. Case in point: Global investors flocked to the safety of U.S. Treasuries after the downgrade. The federal government's fiscal flexibility is blocked by political gridlock. The Federal Reserve is the only policymaker in town.

How should people go about protecting themselves? It goes without saying that I wouldn't panic. That's true whether the stock market is soaring (a greed panic, chasing after bull market gains) or when the market is collapsing (a fear-panic, fleeing with the herd). More important, the recent turmoil is simply the latest eruption of the past four years. In light of this recent history, most people saving for their retirement in a 401(k) and their children's college education in a 529 have already constructed a more conservative portfolio.

Even more important, all of us should focus on calibrating our savings strategy to rhythms of our lives, our values and our goals rather than the whims of the market casino and the advice of professional money managers. (Sell everything! No, buy!) If you're child is heading off to college in three years, it shouldn't matter if the stock market is a screaming "buy" or plunging because you should be building up cash to meet the tuition tab.

Invest with a margin of safety. Save to protect yourself from the downside. Diversify among stocks, bonds and cash, internationally and domestically.

Chris Farrell is economics editor for "Marketplace Money." Send your questions to cfarrell@mpr.org.