Though the 2009 results aren’t fully in yet, three of the four quarters are in…. which is enough to start assessing last year, and comparing it to what the so-called experts expect to see for the current year.

To that end, let’s take a look at earnings levels for each of the major market caps…. where they were, how bad they got, how much they’ve recovered so far, and what 2010 holds in store.

As you can see, earnings-wise, the S&P 500 large cap index only did a little better in 2009 than it did in 2008 on an operating basis (2008 actually served up net losses on a GAAP basis). But, earnings are expected to ramp up by 34% this year. That’s still shy of 2007’s profit levels, but respectable. More importantly, it’s a believable target.

Earnings for the S&P 400 mid cap index are pretty well aligned with their large cap brothers. Next year should be better, by about 51%. That will also leave these stocks just shy of 2007’s operating earnings mark. On this front, the numbers start to feel a little more aggressive, though not out of reach.

The S&P 600 small cap index may be the most troubling of the three. Standard & Poor’s is looking for earnings to double in 2010, falling just a little short of 2007’s levels. Granted, small cap earnings fell the most in 20087, and could arguably stand to gain the most back in a recovery. This is not 2007 though… and not the same environment. With the bar set so high, the small caps could be poised to disappoint as a group.

Be that as it may, earnings trends and earnings improvements are only half the story. If profits are only up 25% compared to yesteryear, but stock prices are down 50% for the time frame, then - like it or not - those stocks are still a bargain. And that’s where this analysis takes a bit of a turn.

Take a look at the nearby P/E table. It includes past, present, and future (projected) price/earnings multiples. All seem palatable at first glance, but the numbers raise the question…. just how much ‘P’ are investors willing to pay when the ‘E’ finally stabilizes? It’s easy to tolerate a lofty P/E ratio when the market and earnings are falling - that’s just life. Now that we’re finding solid ground though, is there any real room for price appreciation?

Take small caps for instance. Even if earnings do double, will those stocks move higher from current prices? Some would say that the expected P/E of 19.10 - which is based on the current value of the index - is reasonable right where it is. Thus, there’s no growth opportunity. Perhaps the market will tolerate a P/E of 30 (though it’s a stretch), which would justify a 50% increase in current prices. That’s the rub here - what will investors deem acceptable valuations?

We’ll just say the forecasts and projections for the S&P 600 and small caps in general leave little room for error…. at best.

That pitfall isn’t quite as pressing with the mid caps and large caps, though it’s still a factor to contend with. If the large cap ‘rule of thumb’ P/E is only 17.0 for the next couple of years, for instance, then the S&P 500 may have a tough time climbing more than 14% in 2010.

It’s just something to think about. Most pundits are hysterically bearish or disturbingly bullish. Tepidness is something that hasn’t really been planned for.

Either way, they’re only projections for now, and the underlying numbers will certainly change as time moves on. We’ll let you know when they do.

In the meantime, plant these forecasts in the back of your head; save them for the point in time when you need a reality check on your euphoria.

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