U.S. Labor Report 'Great,' but Is There a Doomsday Scenario Down the Road?

NEW YORK (TheStreet) -- The big news is out, as the U.S. economy added 280,000 jobs in May, topping economists' expectations for a gain of 225,000. At first, stocks declined on the notion that the Federal Reserve may hike interest rates sooner than expected.

However, with the S&P 500 back to flat on Friday's trading session, investors are pleased with the response.

"I think the market is responding very well to the jobs number," Stephen Weiss, founder and managing partner of Short Hills Capital Partners LLC, said on CNBC's "Fast Money Halftime" show.

The results were good, added Josh Brown, CEO and co-founder of Ritholtz Wealth Management. The report walked a fine line, one where both bullish and bearish investors weren't left with many catalysts. In other words, the report showed improving signs in the economy without moving the stock market one way or the other.

Too good of a report would have investors fearful of a rate hike, while a poor result would have suggested that the labor market is failing to grow at a significant pace. This was a "great print" for the jobs result, said Rob Sechan, institutional consultant at UBS.

It's still "way too early" to tell if the Fed will raise in September, he added. As a result, it's likely that bond yields will slowly climb higher. While the traders are happy with the results, not everyone is smiling, at least when it comes to the long-term picture. "We're in the midst of one of the greatest credit booms ever, so that makes me very, very bullish for the next number of years," said Brian Reynolds, chief market strategist at New Albion Partners.

Reynolds is bullish over the next four or more years, but beyond that, he forecasts the stock market will correct more severely than it did in 2007-08. He argues that both stocks and bonds will continue to rise in in a bull-market manner, but ultimately, investors and corporations will use too much leverage, eventually leading to financial demise.

Sechan argues that the analysis makes sense, but he disagrees with the doomsday scenario. Instead, he believes that when interest rates rise, corporations will shift from share buybacks to long-term investing and more capital spending, which is good news for long-term shareholders.

"In 2018 or 2019, call me then," Brown said of an impending collapse. Yes, bull markets tend to end badly, he acknowledged, but the market is far from entering a bear market.

Avoid bonds and stay long stocks, Weiss added.

The conversation turned to oil, after the Organization of Petroleum Exporting Countries earlier announced that it plans to maintain its current rate of production. That's no surprise to Jeff Currie, global head of commodities research at Goldman Sachs (GS). While oil prices have recovered, he's remaining relatively bearish on the commodity. He expects oil to fall to around $45 per barrel by October and to $50 by December. His 12-month price target is $55 per barrel, $3 lower than the current price.

Currie acknowledged that demand is improving for oil, but said that oversupply is still a problem. Although U.S. drilling and capital expenditures have fallen significantly, U.S. production continues to go higher. He also made the case that many companies simply drill into new wells, but do not pump the oil out of them, which is like having inventory, as the oil companies can quickly tap into these wells and get crude oil out of the ground much faster than usual, since the well is ready to go.

Because of current production and the number of on-tap wells, oil prices can continue to stay lower for longer, he concluded.

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stock mentioned.

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