Are stocks too expensive? Yes, stocks definitely cost a lot right now, but that cost may be justifiable. That may surprise those market watchers who see a slowing macro economy. But the stock market itself continues to benefit from major capex in AI. Underlying dynamics may invite greater investor confidence in equities, then, especially when paired with the right ETF.
See more: Active ETF TSPA Hits $2 Billion in AUM
Are stocks justifying their high valuations? That’s a key question for investors looking toward the end of 2025 and the start of 2026. Many are well aware of the contribution AI spending has made to the market. The big AI hyperscalers have been major winners in 2025, including the likes of Amazon Web Services (AWS) and Apple (AAPL).
Digging in a bit more, however, one can get a stronger sense of their performance and health of their outlooks. T. Rowe Price Capital Markets Strategist Timothy Murray explored the topic in a recent piece of analysis. Despite that slowing economy, the lagging impact of post-pandemic rate hikes, and tariff issues, AI spending has been a key driver for robust market growth.
Those hyperscalers have been able to push through higher borrowing costs thanks to significant cash flows. Those firms, he noted, represent a much heavier weight in the U.S. stock market than the interest-rate-sensitive sectors.
“This means that U.S. stock market fundamentals can be strong despite modest overall economic growth,” he wrote.
Murray points to fundamental metrics like the S&P 500’s forward earnings estimates as well as its return on equity as further points backing the overall investability of the equity landscape right now. That may invite investors to consider how an active ETF can get the most out of leaning into those fundamental factors.
An active ETF like the T. Rowe Price Equity Research ETF (TSPA ) could help. It engages in bottom-up portfolio construction that emphasizes fundamentals to assign weights and decide on investments. Charging 34 basis points (bps), the fund has outperformed the S&P 500 over the last three years, per YCharts data ending October 28.
Many investors may feel a lot of uncertainty about the stock market right now. While equities have reached high valuations, the future remains full of possibility with the right approach — and the right ETF. An active approach, offering flexibility and fundamental research, could prove a shrewd option.
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