Stocks: It is difficult to predict future returns, but I would at least calibrate my expected returns based on inflation expectations. Research indicates that equity expected returns and expected inflation move together…
…then, all else equal, current expected stock returns should be lower than historical stock returns.
Bonds: I agree with you that the yield to maturity for high quality government bonds is the best estimate for their expected returns, I would just make sure the maturity matches the time horizon. For a 25 year time horizon, I look at bonds that mature in 25 years.
Stocks: It is difficult to predict future returns, but I would at least calibrate my expected returns based on inflation expectations. Research indicates that equity expected returns and expected inflation move together…
http://www.federalreserve.gov/pubs/feds/1999/199902/199902pap.pdf
…and if expected inflation is lower than average (which I think it is)…
http://www.tradingeconomics.com/united-states/inflation-cpi
http://www.tradingeconomics.com/euro-area/inflation-cpi
…then, all else equal, current expected stock returns should be lower than historical stock returns.
Bonds: I agree with you that the yield to maturity for high quality government bonds is the best estimate for their expected returns, I would just make sure the maturity matches the time horizon. For a 25 year time horizon, I look at bonds that mature in 25 years.
Disclaimer: this is not investment advice.