Thanks to an improving economy and reassuring earnings released so far, sentiments in U.S. markets bounced back lately overriding worries over the presidential election, Fed rate hike speculation and volatility in the oil patch. Upbeat inflation data from Europe also supported the rally as this quelled the global growth worries a bit.

But note that though the odds of a severe downturn are pretty low at the current level (or nil to tell you the truth), the fact remains that the U.S. economy is far from being healthy. Most interestingly, the U.S. economy saw a considerable reduction in growth projection from 2.2% to 1.6% by the International Monetary Fund (IMF), thanks to low business investments.

However, some concerns have started to build up over the recent surge and some market analysts are warning of a correction in the coming weeks. This could happen, as valuations appear a bit rich at the current levels.

So, what sort of stocks should one pick to cash in on the moderately buoyant sentiment that can simultaneously insulate the portfolio from a slowing economic growth outlook? In our opinion, it has to be the mid-cap value ETF corner. We’ll tell you why.

Wining Argument Behind Mid-Cap Investing

Investors should note that though retail sales picked up in September, the momentum may melt down in October. This is because consumer confidence suddenly dropped to a one-year low this month given the uncertainty over the presidential election.

Total nonfarm payroll employment rose by 156,000 in September 2016, below an upwardly revised 167,000 in August and market expectations of 175,000. It was the lowest payroll number in four months.

So, a bet on small-cap stocks is not reasonable as this part of the capitalization spectrum better reflects the domestic economic health. On the other hand, the U.S. dollar spurted to a seven-month high. This puts large-cap stocks in jeopardy as mega-cap stocks have considerable exposure in foreign lands and are thus susceptible to adverse currency translation.

But then, the final quarter of the year is mostly beneficial for the stocks of big companies.  As per a recent article published in Wall Street Journal, “ the 20% of stocks with the largest market caps beat the smallest-cap quintile by an average of 1.3 percentage points” in Q4 of all years since 1926. Tax-loss selling and end-of-year window dressing are deemed as the key drivers of the trend, according to the article. This theory makes mid-cap ETFs more intriguing as these offer the best of both worlds.

Why Value?

Picking value securities in this capitalization level allows investors to earn more returns. This is because U.S. presidential election, higher stock valuation, a still-shaky global economy and the yet-to-be-seen impact of a ‘Hard Brexit’ will not let investors sit still. Thus, staying on the value spectrum seems wiser for now.

Below we highlight a few mid-cap value ETFs which could in focus ahead:

iShares Morningstar Mid-Cap Value (JKI - Free Report)

The $229-million ETF looks to track the performance of the Morningstar Mid Value Index. This $177-stock fund has double-digit exposure in financials (21.58%), utilities (13.48%), energy (13.13%), IT (12.47%) and consumer discretionary (10.26%) stocks. The fund charges 30 bps in fees and yields 2.30% annually (as of October 18, 2016).

First Trust Mid Cap Value AlphaDEX Fund (FNK - Free Report)

This $46.7-million product employs the NASDAQ AlphaDEX Mid Cap Value Index. This 225-stock fund does not put more than 1.06% weight in any single stock. Financials makes up for the top sector at roughly 25.62% share followed by industrials (20.43%) and consumer discretionary (17.54%). It charges 70 bps in annual fees.

PowerShares Russell Midcap Pure Value Portfolio ETF (PXMV - Free Report)

This $45.1-million ETF holds 164 stocks in total. The fund has a spread-out approach in stock-picking while puts 26.3% of its weight in the financial sector. The fund charges 39 bps in fees and yields about 2.27% annually (as of October 18, 2016).

WisdomTree MidCap Dividend Fund (DON - Free Report)

This ETF provides exposure to the mid-cap segment of the U.S. dividend paying stocks. The $2.09-bilion fund charges 38 bps in fees.  Holding 388 stocks in its basket, the product is widely diversified across each component with each holding less than 2.96% of assets. From a sector look too, the fund is pretty well spread out with consumer discretionary, real estate, industrials, utilities and financials taking a double-digit exposure each. DON yields 2.61% annually (as of October 18, 2016).