Economist James Paulsen used a term recently that I have not heard for many years: stagflation.

He mentioned it in a May 14 newsletter that includes investment tips for clients of Minneapolis-based Leuthold Group.

I’ll share some of those tips below, but first let’s look at why Paulsen is reviving an economic term that was popular during the Ford and Carter administrations.

His newsletter is titled “When Bulls And Bears Agree.”

He wrote, “Bulls are optimistic primarily because Main Street is doing so well, and this is precisely why Bears are pessimistic.”

Earlier in this economic recovery, he noted, there was “an ample supply of unemployed” workers, which acted as a brake on inflation and allowed the economy to grow “without negative consequences for the stock market.”

Conversely, when things slowed down, low inflation kept the decline from careening out of control.

Today, unemployment is at or near record lows, which has removed much of the cushion that was keeping inflation at bay. That’s led to increased fears of inflation, which could push interest rates higher and put a damper on growth.

“Slower economic growth likely disappoints the Bulls and may also be insufficient to lower inflation and interest rate pressures, leading to stagflation fears,” Paulsen wrote.

“Strong growth aggravates the Bears, weak growth disappoints the Bulls,” he added, leading him to ask whether “stagflation may lie in the middle.”

To be clear, 21st-century stagflation would be different from the economic malaise that gripped England during the 1960s and took hold of the U.S. economy a decade later. The stagflation of 40 years ago was characterized by stagnant consumer demand brought on by high unemployment, high interest rates and rising inflation.

That was a deadly combination. But among those ingredients, one — high unemployment — is clearly missing today. Nor are the others as virile as they were in 1976 when President Gerald Ford’s campaign slogan was Whip Inflation Now (WIN).

Ford lost and it took more than a slogan to beat back inflation, which continued until Paul Volcker took over as chairman of the Federal Reserve in 1979 and tightened the money supply. Volcker’s crackdown eventually worked, but not before it helped launch a major recession and the 1980s farm crisis.

Needless to say, those are years that no one wants to repeat. And we won’t, as long as we remember the economic lessons of that period.

Paulsen wrote that the best solution today is a Goldilocks approach with policies that are neither too strong nor too weak.

He suggested two ways for restarting the bull market while avoiding a 21st-century version of stagflation.

One is by boosting productivity, which, he admitted, is unlikely to occur.

The other is periodic market downturns, which effectively give stocks new room for growth. The trick, of course, is to prevent downturns from turning into crashes.

Paulsen predicted the near future could produce “a volatile trendless stock market.” He offered these tips:

• Fight the urge to become overly bearish about stocks. As long as the economic recovery continues, “another leg of this bull market seems likely after a valuation adjustment,” he wrote.

• Keep fixed income exposure to a minimum, he added, because the bond market is also being re-priced and won’t offer much protection from a volatile stock market.

• Significantly overweight both international developed and emerging stock markets, because overseas markets are cheaper and face fewer pressures to overheat.

• Favor small- over large-cap stocks, because smaller companies are more agile and tend to outperform large organizations during periods of rising inflation and interest rates.

• Hold some cash. It could come in handy, if the stock market suffers another panicky correction.

Or if stagflation arrives.