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What's This 'Fiscal Cliff' Anyway? Do I Need to Worry?

In other words, policymakers soon will embark on another round of their favorite sport: Can-kicking problems as far down the road as possible (if you'll pardon the overused market cliche).

"In 2012, the fiscal cliff carries major economic consequences...but (is) unlikely to trigger a financial crisis," Lee said. "Of course, we ultimately expect some form of 'can kicking' but even if this comes down to the final week of December before action, we expect markets to become more comfortable with the notion this is not a financial crisis a la 2011."

Ah yes, 2011.

That was the year the U.S. confronted the danger of defaulting on its cascading debts, a situation that ultimately led Standard & Poor's to downgrade American debt for the first time in the nation's history.

"Investors are at the front-end of thinking about the fiscal cliff as well as the turmoil in Europe and thus, naturally, caution about the next two quarters is building," Lee said. "We also know that the crisis was only buyable last year when we saw the 'whites of the eyes' of resolution and thus, the logical choice is to be cautious.

Lee sees investors efforts trying to front-run -- and sell into -- a bad outcome for the Washington negotiations. That, in turn, will offer a dip-buying opportunity, with specific focus on financials and cyclicals. He also expects energy to outperform as it often does following consecutive quarters of strong stock market gains.

Some of JPMorgan's top choices for individual stocks: Pioneer Natural Resources (PXD), Air Lease Corp (AL), Denbury (DNR), Embraier (ERJ) and Berry Petroleum (BRY).

Other experts are a bit less sanguine about the outcome, even though the consensus belief is that the U.S. is unlikely to tumble off the cliff all at once.

"If politicians continue to dither, investors should view the fiscal cliff as a major economic and political threat to growth, and one that would warrant a higher risk premium in the valuations of equities, high yield bonds and other risk assets," Pimco's Mohamed El-Erian said in an email response to a question about the fiscal cliff.

Michael Yoshikami, CEO and founder of Destination Wealth Management in San Francisco, thinks investors ought to gravitate to dividend-paying stocks to protect cash flow, with a focus on technology and consumer staples -- essentially "higher-growth assets or assets that do well in a more austere environment."

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