If Canadians are worried about the recession economists keep talking about, it’s tough to tell. A new survey by the Bank of Montreal found that almost a quarter of Canada’s citizens are still living paycheck to paycheck. Roughly 25% of respondents said they had hardly anything set aside, and more than half reported having less than $10,000 in emergency funds.

Meanwhile, consumer confidence is up. A recent Bloomberg survey showed that Canadians are less worried about the economy than even a few months ago. Is there reason to be worried and should you be safeguarding your portfolio?

Betting against the Canadian real estate market is getting popular

One of the biggest drivers of an improved economy over the past decade has been a booming real estate market in most of the country’s major metropolitan areas. Higher home values spur more construction, which equals more jobs. It also gives homeowners more spending power and net worth.

Still, every bull market ends some time. Speculation about the Canadian housing market has been rampant in recent months, with many investors, and even the Bank of Canada, warning that housing could be overvalued by as much as 30%.

Toronto-based mortgage brokerage provider Home Capital Group Inc. has become the second most-shorted company in Canada.

Enough to bring down the entire economy

With Canada entering a technical recession this quarter due to massive layoffs and solvency issues with major oil and gas companies such as Encana Corporation and Enerplus Corp., it wouldn’t take too much to send the economy into free fall. Unfortunately, a pop in the housing bubble could do just that.

According to a report by the Canada Mortgage and Housing Corporation, part of Canada’s housing bubble might be about to burst. In a country that has a slowing economy, it believes a real estate crash could trigger an economic collapse. The report stated that the “rise in house prices have not been matched by growth in personal disposable income.”

With falling savings rates and higher consumer spending levels, citizens may be exacerbating this potential future risk.

What should you do?

While you should always judge each company on an individual level, consumer staples are usually a less volatile area when entering a recession. Consumers tend to continue buying items such as toilet paper and grocery food regardless of the economy.

Such companies include beer manufacturer Molson Coors Brewing Company (TSX:TPX.A)(TSX:TPX.B)(NYSE:TAP), food producer George Weston Limited (TSX:WN), and dairy processor Saputo Inc. (TSX:SAP).

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Fool contributor Ryan Vanzo has no position in any stocks mentioned.