NEW YORK, Sept 20 (Reuters) - A roaring rally in U.S.

stocks will face a gauntlet of economic data, looming political

uncertainty and a corporate earnings test in coming weeks as

investors navigate one of the most volatile periods of the year

for equity markets.

The benchmark S&P 500 this week hit its first closing

all-time high in two months after the Federal Reserve unveiled a

hefty 50-basis point rate cut, kicking off the first U.S.

monetary easing cycle since 2020.

The index is up 0.8% so far in September, historically the

weakest month for stocks, and has gained 19% year-to-date. But

the rocky period could carry over until the Nov 5 election,

strategists said, leaving the S&P 500 vulnerable to market

swings.

"We're entering that period where seasonality has been a bit

less favorable," said Angelo Kourkafas, senior investment

strategist at Edward Jones. "Despite the excitement about the

start of the new rate-cutting cycle, it could still be a bumpy

road ahead."

The second half of September is historically the weakest

two-week period of the year for the S&P 500, according to a Ned

Davis Research analysis of data since 1950.

The index has also logged an average 0.45% decline in

October during presidential years, data from CFRA going back to

1945 showed.

Volatility also tends to pick up in October in election

years, with the Cboe Market Volatility index rising to an

average level of 25 at the start of the month, as opposed to its

long-term average of 19.2, according to an Edward Jones analysis

of the past eight presidential election years. The VIX was

recently at 16.4.

The market could be particularly sensitive to this year's

close election between Republican Donald Trump and Democrat

Kamala Harris. Recent polls show a virtually tied race.

"Unless the data deteriorates considerably, we think U.S .

elections will start to be more at the forefront," UBS equity

derivative strategists said in a note.

Investors are also looking for data to support expectations

that the economy is navigating a "soft landing," during which

inflation moderates without badly hurting growth. Stocks fare

much better after the start of rate cuts in such a scenario, as

opposed to when the Fed cuts during recessions.

The coming week includes reports on manufacturing, consumer

confidence and durable goods, as well as the personal

consumption expenditures price index, a key inflation measure.

Attention will be squarely on employment after Fed Chair

Jerome Powell said the central bank wanted to stay ahead of any

weakening in the job market as the Fed announced its cut this

week. The closely-watched monthly U.S. jobs report is due on Oct

4.

"We're going to have hyper-focus on anything that speaks to

the strength of the labor force," said Art Hogan, chief market

strategist at B Riley Wealth.

Meanwhile, the rally in stocks has pushed up valuations. The

S&P 500 has a price-to-earnings ratio of 21.4 times expected

12-month earnings, well above its long-term average of 15.7,

according to LSEG Datastream.

With the scope for valuations to go higher now more limited,

investors said that puts a greater burden on corporate earnings

to be strong in order to support stock gains.

Third-quarter reporting season kicks off next month. S&P 500

earnings for the period are expected to have climbed 5.4% from

the prior year, and then jump nearly 13% in the fourth quarter,

according to LSEG IBES.

FedEx ( FDX ) shares tumbled on Friday after the delivery

giant reported a steep quarterly profit drop and lowered its

full-year revenue forecast.

"Extended multiples put pressure on macro data and

fundamentals to support S&P 500 prices," Scott Chronert, head of

U.S. equity strategy at Citi, said in a report.