The S&P 500 has 20% more downside before bottoming, but don't abandon stocks as these 3 sectors show promise, Morgan Stanley's chief us equity strategist says

Morgan Stanley's chief US equity strategist Mike Wilson said that investors shouldn't give up on individual stocks as a few sectors have potential.

The long-time stock market bear believes that the S&P 500 will decline by 20% at the low end.

"We don't know if it's going to be this quarter or next quarter, but it's probably some time in that period," he said.

Investment grade debt is more attractive than the S&P 500 in the next six to 12 months.

Even though the average stock has been in a bear market for more than a year, investors should look at individual stocks instead of the broad index.

He said that you shouldn't abandon stocks because there are lots of attractive names.

Semiconductor, consumer discretionary spending and communication services are promising. Wilson said they have made a step in the right direction.

He said Morgan Stanley has a dual strategy of favoring superior operators that can deliver operating profits and cash flow during market turbulence as well as companies that have offered realistic or even overly pessimistic guidance.

He said that they are trying to get clients into those types of strategies.