Macroeconomic and market forecasts are notoriously difficult, even for experienced hedge fund managers. What matters more than being right, however, is ensuring that incorrect macro or market bets don not inflict serious damage on a fund’s performance. At Swedish fund boutique Atlant Fonder, the investment team anticipated that “the rebound phase is nearing its end and that new declines will soon take over,” following a sharp drop and subsequent recovery in equity markets in April. Heading into May, they expected “a neutral to negative stock market in the first half.” However, the market moved in the opposite direction, with the S&P 500 rising by 4.5 percent over the first two weeks of the month. Yet, despite the missed call, most of Atlant Fonder’s funds delivered positive returns.

“That forecast can quite comfortably be named the worst of the year so far… A 4.5 percent increase was the outcome for the first half of May, which doesn’t quite align with ‘neutral to negative,’” admits Anders Kullberg, CIO of Atlant Fonder, in a note to investors. “We can only acknowledge that this is certainly neither the first nor the last time the market will completely surprise us,” he emphasizes. “On the positive side, we never assume our forecasts will always be correct, which is why most of our funds usually perform reasonably well anyway—this time included.”

“On the positive side, we never assume our forecasts will always be correct, which is why most of our funds usually perform reasonably well anyway—this time included.”

Anders Kullberg, CIO of Atlant Fonder.

Atlant’s two absolute return funds, Atlant Edge and Atlant Opportunity, took divergent paths during the month. Atlant Edge, which held several speculative positions anticipating a market decline and maintained relatively low exposure to corporate bonds, faced a challenging stretch. In contrast, Atlant Opportunity, the firm’s flagship fund with SEK 6.5 billion in assets under management, edged up by 0.2 percent in the first half of May, as did five of Atlant’s eight funds. Atlant Sharp delivered strong performance, gaining 4.8 percent and bringing its year-to-date return back into positive territory at 4.0 percent. Atlant’s two fixed-income strategies, the low-risk Atlant Stability and the higher-risk Atlant Högräntefond, also gained during the first half of the month.

Despite the market’s continued strength, the team at Atlant Fonder maintains its conviction that “we have seen a long-term market top in both Sweden and the U.S., and that new lows lie ahead, with the decline expected to begin in the second half of May and bottom out in June,” says Kullberg. “That said, the rebound—still classified as such by us—has extended much further than we anticipated, which doesn’t exactly boost our confidence.”

“We humbly acknowledge that the market participants don’t seem to share our view—at least not at the moment. But as usual, we are putting on both belt and braces to protect the portfolios in case that forecast turns out to be wrong—yet again.”

Peter Beckman, CEO of Atlant Fonder.

“All in all, now that the reporting season is more or less over, we can conclude that the overall impression remains one of continued strength,” concludes Kullberg However, he notes that analysts have revised down aggregate earnings expectations for 2025 by around 10 percent in Sweden, with a slight downgrade also seen in the U.S. Given that valuations were already elevated from a historical perspective even before these revisions, Atlant sees these revisions as reinforcing its bearish market outlook. 

“We humbly acknowledge that the market participants don’t seem to share our view—at least not at the moment,” adds Peter Beckman, CEO of Atlant Fonder. While the market has yet to reflect this view, the team maintains that conditions are in place for a new downward wave to begin in the second half of May. “But as usual, we are putting on both belt and braces to protect the portfolios in case that forecast turns out to be wrong—yet again.”