(Editor's note: The following is the first of a two-part series analyzing performance characteristics of U.S. stock markets by style and size during the current three-month rally. The final installment "Does Size Trump Style?" can be found here.)

Heading into the second half of 2009, growth is clearly king in terms of stock styles.

But it's facing a strong resurgence by value-oriented investors. Emboldened by depression-like prices just a few months ago, bargain bin shoppers are watching their favorite names score super-sized returns as economic fortunes improve and credit markets revive.

In the ongoing rally that began on March 9 and set a new high-water mark for the year on June 1, the large-cap-dominated Russell 1000 index series, as well as the small-cap-focused Russell 2000 indexes, have shown strong performance slants toward value.

When monitoring the 1000 Value vs. the 1000 Growth benchmarks during the latest rebound, the former has a better-than-7-percentage-point advantage. The Russell 2000 Value Index has about a 3-percentage-point cushion. (See table below.)

But contrast those results to year-to-date benchmark returns through June 1:

• In small-caps, the Russell 2000 Growth has returned 15.76% versus 2.49% for the Russell 2000 Value, or a 13.27-percentage-point pad for growth.

• In large-caps, the Russell 1000 Growth has gained 15.28% versus 1.76% for the Russell 1000 Value, or a 13.52-percentage-point advantage for growth.

The rally, now at 12 weeks, has been strong for both types of style benchmarks, and regardless of size. But it clearly hasn't been enough to erase the damage from a recession that lasted more than 19 months. So the question facing investors as the second half of 2009 unfolds is whether value's run will continue.

In a very general sense, valuations seem to remain reasonable in many key sectors. That would seem to bode well for a continuing surge of interest in value names and sectors. In order for investors to assume more risk, however, much will depend on perceptions of the economy's overall health. If conditions keep normalizing, then long-term historic return patterns suggest that value stocks of all sizes should rebound.

Although value has led growth in this rally, growth has lost less in the past 12 months. That's quite a reversal from the recession of 2000-2002. But notice that gap was miniscule in small-caps while large-caps have enjoyed nearly a 5.4-percentage-point outperformance. It makes sense, given that blue chips are more diversified and less susceptible to the ravages of illiquid credit markets.

Taking a longer-term perspective using the Russell indexing series as a proxy for the overall U.S. marketplace, growth's advantage has proven to be fleeting. In the past 10- and 15-year rolling periods through June 1, value stocks have taken the upper hand ... sometimes significantly.

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