NEW YORK (Reuters) - A rebound in growth and technology stocks has investors gauging whether a months-long rally in the shares of banks, energy companies and other economically sensitive names is running on empty or simply refueling. The Russell 1000 value index started 2021 with its biggest quarterly outperformance relative to its growth counterpart in 20 years, as investors poured money into the shares of battered companies they thought would benefit most from a vaccine-generated reopening of the U.S. economy. The script has flipped since mid-March, with the Russell growth index gaining over 6% compared to a rise of just over 2% for value. Some investors wonder whether the market has already priced in expectations of a powerful economic rebound on the stimulus, infrastructure spending and vaccine rollouts. “We have already had a tremendous move” in value stocks, said Mona Mahajan, senior U.S. investment strategist at Allianz Global Investors. “We are probably at the stage where we just want to be a little bit more cautious, a little bit more selective.” Value stocks generally trade at low price-to-book or other valuation measures. Investors still see a lot of upside in the group, where names remain cheap after a decade of being trounced by high-flyers such as Amazon, Netflix and Google-parent Alphabet. Despite their recent rally, value stocks remain about 11% below their historic average discount to the market using a composite of price-to-book and other measures, according to Solomon Tadesse, head of North American quant equity research at Societe Generale. The discount is roughly comparable to where value stood in November 2008, with the financial crisis in full swing. Based on price-to-book measures, value stocks are also trading some 74% cheaper than growth peers, according to Peter Berezin, chief global strategist at BCA Research. Such a discount was last seen during the tech boom over 20 years ago, Berezin said. Investors betting on the reflation trade say that discount gives value stocks plenty of room to run, noting the Federal Reserve expects the U.S. economy in 2021 to grow by 6.5%, its strongest expansion in nearly 40 years. “We have had some false starts, but I do think that this time it’s real in terms of the value trade,” said King Lip, chief strategist at Baker Avenue Asset Management, which has tilted toward value in its portfolios by over-weighting financials, industrials, and materials shares. Graphic: Value stocks vs growth Strong earnings results by banks and other value stalwarts could trigger more gains in the category. Reports from JPMorgan Chase and Citigroup are set to kick off earnings season next week. Overall, 2021 earnings for Russell 1000 value companies are expected to rise 26.4%, beating a forecast 17.7% rise for companies in the growth index, according to Credit Suisse data as of the end of March. Still, some investors expect growth stocks will continue to outperform as they have most of the time since the financial crisis. The Russell growth index has climbed over 700% since early 2009, more than doubling value’s gains. “I think the easy money in value stocks is over,” said Rick Meckler, partner at Cherry Lane Investments. Value has “closed the gap enough that if the market has more room to run up, it is probably going to come back to the names that investors love, the growth names.” Some investors say any sign of a coronavirus resurgence could spur a return to the stay-at-home trade that powered tech stocks last year. Graphic: Value stock spread vs growth Investors are also watching the U.S. Treasury market where a selloff slowed in recent weeks after pushing the 10-year Treasury yield up by over 80 basis points in the first quarter. Rising yields could hurt technology and growth stocks, whose cash flows tend to be longer term and are discounted more in standard stock valuation models when bond yields climb. With plenty of stimulus in the markets and investors focused on inflation, “I don’t see a strong argument against the 10-year (yield) continuing its rise and further juicing the rotation (into value),” said Ross Mayfield, investment strategist at Baird.