Goldman Sachs bets on "stocks rising and bonds in a bull market": S&P 500 targets 8,700 points, 10-year U.S. Treasury yield to fall to 4.5%.

Goldman Sachs expects the S&P 500 to rise 13.7% over the next 12 months, with the 10-year U.S. Treasury yield falling from the current 5% to 4.5%. The bank's 12-month target for the S&P 500 is 8,700 points, above the current 7,651 points. Goldman Sachs expects the index to reach 8,000 points in three months and 8,300 points in six months, implying gains of 4.6% and 8.5%, respectively. The forecasts also show other major stock markets moving higher. Goldman Sachs expects the pan-European STOXX 600 index to rise from the current 635 points to 695 points in 12 months, a gain of 9.4%. The MSCI Asia-Pacific ex-Japan index is expected to rise 27.2% from 880 points to 1,120 points, while Japan's TOPIX is expected to rise from 4,091 points to 4,600 points, a gain of 12.4%. Goldman Sachs said it expects U.S. Treasury yields to decline over the same period. The 10-year U.S. Treasury yield is expected to be 4.8% in three months, 4.7% in six months, and 4.5% in 12 months, down 54 basis points from the current 5%. The German 10-year government bond yield is expected to fall from 3.5% to 3.3%, while the Japanese 10-year government bond yield is expected to reach 3% in three and six months from the current 2.9%, before falling back to 2.9% in 12 months. The bank's exchange rate forecasts show the yen strengthening against the dollar, but the euro and pound weakening against the dollar. The euro is expected to fall from the current 1.15 to 1.12 in 12 months, and the pound is expected to fall from 1.34 to 1.28. The dollar is expected to rise from 157 to 165 against the yen, implying a 5.2% gain for the dollar against the yen. Goldman Sachs also said it expects commodity prices to diverge. Gold is expected to rise from the current $4,352/oz to $5,140/oz in 12 months, a gain of 18.1%. Brent crude is expected to fall from $103.9/bbl to $78/bbl, and NYMEX natural gas is expected to fall from $2.90/MMBtu to $2.75. LME copper is expected to fall from the current $14,543/tonne to $13,800/tonne.