Federal funding pause, if not a bluff, could be a Lehman moment
Plus, rethinking data center energy usage in a DeepSeek world
In today’s edition:
— Trump’s federal funding pause could be a big bluff, or a Lehman moment for markets
— Market scare over China’s DeepSeek could cause overhaul of U.S. data center plans
— Carbon emissions rose fastest on record last year; now more than 50% higher than pre-industrial age, BBC reports
— Solar growth could slow in 2025 because of policy uncertainty, analyst report says
— Bird flu precautions have caused 10% of U.S. egg-laying chickens to be destroyed

U.S. stock investors were too focused on the threat of Chinese AI early this week to begin to understand the implications of a far bigger threat to the markets in President Donald Trump’s executive order to pause federal funding grants. Even with the bone-rattling decline in chip and energy resource stocks, most of the biggest names are still up more than 100% over last year, as the chart above shows.
But the federal funding pause takes us into no-man’s land, threatening to halt more than $1 trillion in funding to state and local governments, according to early numbers compiled by Bloomberg.
As an attention getter, the pause threat worked far better than DeepSeek, at least for government and non-profit executives across the country. Which is why it is likely a bluff; one of Trump’s signature maneuvers to shock everyone with a headline and then go forward with a lesser plan based on reaction. Sort of like ending the Ukraine war in a day. Already, state and local lawsuits are working their way into the courts.
While a review of government spending is necessary and welcome, a spending pause during the review could create a ripple effect that nobody is quite prepared to understand, least of all the yes-men in the new government. Investors may remember how the collapse of Lehman Brothers in 2008 quickly spread from Wall Street to construction projects nationwide, school funding, and even led to a bailout of the auto industry. It was the tipping point of the 2007-2008 financial crisis, which took a decade to recover from.
No two crises are identical, but the ripple effect from a federal funding pause could — like Lehman — lead to unintended consequences that, again, like Lehman, the financial regulators and central bankers don’t understand.
Trump and his team are doing their best to create maximum turmoil in early days, so they can be seen as saviors. Whatever. Investors should expect that this early reaction to the federal funding pause trial balloon will be enough to dilute the worst effects of it. But just in case, the search for financial implications begins today.
Don’t forget to contact me directly if you have suggestions or ideas dcallaway@callawayclimateinsights.com.
Follow us . . . .
Twitter | LinkedIn | Facebook | Instagram
Tuesday’s subscriber insights
DeepSeek scare prompts second look at U.S. data center growth plans
Keep reading with a 7-day free trial
Subscribe to Callaway Climate Insights to keep reading this post and get 7 days of free access to the full post archives.