Stocks closed sharply lower on Wall Street, erasing over 1,400 points from the Dow industrials as investors await a more aggressive response from the U.S. government to economic fallout from the coronavirus. Vanguard suggests a 70/30 bond-to-stock allocation for better long-term returns, with US equities predicted to return 3.3%-5.3% annually versus 4%-5% for bonds over 10 years. The firm recommends investors shift more money into bonds due to stretched stock valuations, saying a 70/30 bond-to-stock split is the most favorable allocation currently. Vanguard notes that stock valuations are high and recommends a more conservative approach, with bonds being attractive relative to U.S. stocks expected to offer returns below their long-term historical averages over the next decade. The firm’s Asset Allocation Model predicts that stocks will underperform with returns of 3.3%-5.3% while bonds are expected to deliver 4%-5% annually. Vanguard also highlights that stock valuations are elevated, with prices high relative to inflation-adjusted earnings over the last 10 years and the equity risk premium historically low. The firm’s forecasts are over a 10-year period, with stocks expected to outperform for those with a longer timeline of 30 years. Vanguard emphasizes that its asset allocation model is not a one-size-fits-all recommendation, and investors should consider individual factors when implementing the portfolio.

Read more at Yahoo Finance: Stocks are roaring higher this year, but Vanguard says investors should stick 70% of their money into bonds