Markets will not normalise until 2011 or 2012, with 2010 set to continue to be a year of “transition and discovery”, according to Janet Henry, an economist at HSBC.

Speaking in the morning plenary session at the Charity Investment Forum 2010, Henry said that while recovery appears to be under way, “the scale of the policy response has been unprecedented, and will not be easily reversed”. She also predicted that US interest rates will stay low, and therefore will continue to support emerging world growth.

Henry demonstrated how home sales in the US have fallen drastically since the withdrawal of temporary supports such as home buyers’ credit late last year, and argued that the US housing market may continue to struggle over the next few months, sparking renewed fears of a ‘double dip’ recession. Meanwhile, Germany is now suffering the payback from the success of its car scrappage scheme; consumer spending has fallen for two consecutive quarters having risen for the previous two as a result of the scheme.

On the UK’s prospects, she said: “One of the surprises in the UK has been the speed with which the housing market has recovered, and which by any measure is still overvalued, in contrast to the US which seems to be fairly valued.” However, in terms of wider economic prospects, she added that a lot would depend on what happens globally and that policy measures by the UK government would not have much impact.