3 Funds Riding a Pricey Market

Current markets are expensive, and one of the brightest flashing indicators of this is the Shiller cyclically adjusted price/earnings ratio. The CAPE metric looks at S&P 500 prices against a 10-year average of inflation-adjusted earnings, the latter of which helps to smooth the business cycle’s ups and downs. At more than 40 in October 2026, the ratio was among the highest readings over the 145 years for which there is data, close to the dot-com bubble’s peak of 44.2 in December 1999.

When markets are priced this richly, it’s worth checking whether your funds are, too. Here’s a look at three funds at the higher end of their historic prices.

MFS Technology’s MTCAX P/E ratio had been trending higher, reaching 39 in June 2026 before dropping to 34 the next month following a technology stock pullback. As of September’s end, the fund’s P/E was still at that level. Technology companies make up more than 80% of the portfolio, with Nvidia NVDA, Broadcom AVGO, and Microsoft MSFT among its top holdings.

Portfolio manager Reinier Dobbelmann looks for proven businesses with pricing power and recurring revenue, which tend to command rich multiples in any market. His reluctance to invest in unproven firms, especially in more cyclical, capital-intensive areas, has resulted in underweight positions in memory players like Micron Technology MU, which have experienced demand surges in recent years. Yet, sticking to high standards has paid off for investors during Dobbelmann’s tenure as lead manager: From September 2023 through October 2026, the fund’s 28.3% gain beat the typical technology Morningstar Category fund by 22 basis points annualized and did so with lower volatility.

Smaller-growth companies generally have pricier metrics compared with the broader market, and ClearBridge Small Cap Growth’s SASMX investment process further reinforces those characteristics. In addition to reserving about half of the portfolio for steady, established names, the fund also invests about a fourth of its assets in more speculative, hypergrowth companies. Managers Aram Green and Jeff Bailin have also softened on their historical underweighting in biotechnology stocks, adding State Street SPDR S&P Biotech ETF XBI in 2024 to close some of the gap; most of that exchange-traded fund’s constituent companies have losses. That combination resulted in the fund’s historically higher P/E of 31.1 as of July 2026, though that measure declined to 24.4 at the end of September.

While Green delivered a respectable 8.6% annualized gain over his tenure from March 2007 through September 2026 that bested the typical small-growth category average by about 60 basis points, more recent returns have fallen short. The fund’s 10.5% annualized gain for the three years through September 2026 lagged the typical peer’s 14.7% return.

Value-oriented funds often stand as the antidote to expensive markets, but JPMorgan U.S. Value VGRIX demonstrates that even value investors haven’t been immune to elevated P/E environments. While it’s true that the fund’s 22.5 P/E in August is lower than the broader market’s 25.3, as represented by the Morningstar US Large-Mid Cap Market Index, it’s still near the highest it has been in the past two decades.

Managers Andrew Brandon and David Silberman’s classic approach to value investing, looking for solid but underappreciated companies, hews relatively closely to the sector weightings of the Russell 1000 Value Index. The index’s weighting in information technology stocks, which are on the higher P/E side, spiked in recent months, hovering around 10% for most of the past five years but increasing to about 19% in July 2026. This fund’s tech weighting similarly increased, to 16.7% in July 2026 from 9.3% at the end of 2025, largely from triple-digit returns in holdings Micron and Western Digital WDC. That’s helped boost the fund’s record since the managers took over in September 2024, though its annualized 12.3% gain through September 2026 still fell behind the 12.7% of the typical large-value category fund.

This article first appeared in the September 2026 issue of Morningstar FundInvestor. Download a complimentary copy of FundInvestor by visiting this website.