The 28-year-old goalkeeper has been linked with a potential exit from the Hawthorns throughout the summer transfer window.
West Ham United seemed to be at the front of the queue to sign him but they were unable to agree a deal with the Baggies, despite tabling a £10m bid.
Would you rather see Johnstone sign a new contract or sold this summer?
Sign a new contract
Sell and cash in
However, they have instead signed the France international Alphonse Areola on loan from PSG to bolster their goalkeeping ranks in this window.
That has left Johnstone somewhat in limbo, although he played in the club’s 3-2 win over Luton Town in the Championship last time out.
Still, Palmer thinks that the Baggies will have expected him to move on in this transfer window, and have been left surprised by the fact that there have not been more willing bidders.
He told This Is Futbol: “I expect West Brom to be fully in the promotion hunt. Ismael proved that with no funds at Barnsley, he did a terrific job.
“I think Sam would have left if people had met the asking price, of what West Brom were asking. They haven’t done that, to be fair to West Brom, they’ve left him out of the side. I think they anticipated him going but it hasn’t happened.”