Dow at 20,000 — is it time to double down or pull out?

Dow 20,000 — it's the talk of Wall Street and maybe even worth a tweet from the president. But what's it mean to professional investors? Mostly a call for caution, it turns out. The Dow Jones Industrial Average's taking out of the latest round-number milestone pushed its gain since March 2009 past 200%. It also conjured memories of the damage done 17 years ago when the blue-chip index soared past 10,000, a siren song for individual investors seeking to jump into the dot-com euphoria. Strategists and money managers surveyed Wednesday by Bloomberg warned about chasing performance this time, citing concerns from stretched valuations to uncertainty over Donald Trump's policies. And history may be on their side. Data on market returns after 1,000-point milestones in the Dow show that while stocks tend to rise more than the historic average a month later, the performance over six- and 12-month periods trailed. Here's a sampling of what professional money managers are saying: “Once retail comes in, that's the time to get out.'' — Weeden & Co. strategist Michael Purves  20K is more psychologically important for retail investors, who have not necessarily participated in the big rally in the last few years. Institutions would be looking at it with a potential warning sign down the road, particularly if we don't get any follow-through on earnings momentum. Once retail comes in, that's the time to get out. That's the thought process that many intuitions will be considering. “I would sell it if the Dow were a stock” -- Charles De Vaulx, chief investment officer at International Value Advisers  The confidence level after Donald Trump's election has skyrocketed. When confidence shifts so abruptly one way, I always worry it could shift the other way as rapidly. The outlook for the U.S. economy may be brighter, but the issue we have is valuation. I would sell it if the Dow were a stock, and I would want to buy it at 15 to 20% lower. I'm not saying I expect the market to go down. My conundrum is investors are not paid enough for risk. “Hedge on any potential downdraft in the stock market.” — Rich Weiss, Los Angeles-based senior portfolio manager at American Century Investments  I don't think anyone would disagree that our new president and new administration are outsiders, they're disruptors. By definition, they're going to make changes, some significant changes. One would expect more volatility, both positive and negative, to come in the coming months. That's a real conundrum, one that we've taken advantage of by purchasing long volatility not for speculative reason, but it provides a nice hedge on any potential downdraft in the stock market. “Like crossing state lines with kids” — Laszlo Birinyi, the president of Birinyi Associates  Historically somebody would have said days like this and numbers like this are like crossing state lines with kids. They get so excited for five minutes and then they ask, where is the next McDonald's? I would not consider it an indicator of any real substance or significance. You're starting to see some more participation from some very significant names, which I think is probably as important as the number itself.