Goldman Sachs Group Inc.GS +0.64% says it knows what’s going to happen when the Federal Reserve starts raising interest rates.

The quick takeaway: Stocks look much more attractive than bonds–at least through 2018.

“We forecast a dramatic divergence between stock and bond returns during the next several years,” a Goldman team led by stock strategist David Kostin wrote to clients this week. Goldman predicts the S&P 500 will generate a 6% annualized total return between now and 2018, compared to a 1% annualized gain for the benchmark 10-year Treasury note, assuming the Fed starts raising rates in the middle of next year.

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