Goldman Sachs Group Inc. predicts the S&P 500 will rise 18% to 1,500 by the end of the year, Bloomberg reported Wednesday. The bank also predicted a "decent" year for Treasuries.

Bloomberg cited a report from Jan Hatzius, Goldman’s New York-based chief U.S. economist: "We have a very out-of-consensus view for how much the economy can grow before this growth generates higher inflation and interest rates. If we’re right, the likely implication is a decent environment for the Treasury bond market and a very good environment for the equity market."

The S&P 500 is up 12% over the past 12 months, its highest level since Lehman Brothers' inglorious fall in September 2008. If Goldman's prediction plays out and the S&P increases to 1,500, it would represent a 19% gain for the year, according to Bloomberg. By comparison, the index rose 23% in 2009 and 26% in 2003.

The report distributed by Hatzius noted that three-month T-bill rates will average 0.2% in 2011 and 0.3% in 2012, Bloomberg writes. Today they are 0.14%. Ten-year Treasury yields will rise to 3.75% by the end of the year.

The bank predicts the economy will expand 3.4% in 2011, and the consumer price index will increase 1.7%.

Goldman Sachs's prediction is in line with Ken Fisher's November 2010 prediction that stocks would rise on average 17.5% in the first 12 months following the mid-term elections.

In December 2010, Cambiar Investors’ Brian Barish predicted that growth in the energy and agriculture sectors would be behind a "multi-speed recovery," leading to a 17% increase in the S&P 500 in 2011.