With only one quarter left in the year, analysts are still uncertain about the outcome of 2008. Shown below are the bottoms up 2008 EPS estimates for the S&P 500 and the ten economic sectors. We have sliced these estimates several different ways, highlighting the uncertainty lying beneath the averages.

As shown, estimates for the financial sector have been slashed 62% over the last three months. 2008 estimates for the index have declined nearly 13%. Even more disconcerting is the range in earnings expectations for 2008. Using the high estimate for each member of the S&P 500 we arrive at an earnings per share number of $87.01; using the lows for each member we get $63.27.

What does this mean? We would take this amount of uncertainty as a sign to use extreme caution. Over the last several months estimates have been steadily revised down across all sectors except health care (as shown above), and the spread between the high and the low estimate is large enough that the consensus can change very quickly. Value investors should continue to use caution, because the estimates used in calculating forward P/E ratios remain highly questionable.

That said, if the earnings come in at the low estimate for every company ($63.27/share), the P/E for the index would be 13.6 which is still below the 60-year average of 17.8. *However*, it must be noted that from 7/31/74 to 12/31/82 the average P/E for the S&P 500 was just 9.17. At the end of the day fundamental analysts are lost in the woods, and stock prices will continue to gyrate.