March 23 (Bloomberg) -- President George W. Bush has tried to sell Americans on an ``ownership society'' that would create more wealth -- and more Republicans in the process. The stock market hasn't accommodated.

The Standard & Poor's 500 Index -- the benchmark for American equities -- is down 2.8 percent since Bush took office five years and two months ago. That's the worst performance during the same stage of any two-term administration in the past half century except that of Richard M. Nixon.

The market's performance is undermining a central goal of White House Deputy Chief of Staff Karl Rove, Bush's chief political adviser. Borrowing from Margaret Thatcher's privatization push in the U.K. in the 1980s, Rove's theory is that if more Americans make their own financial decisions and the last vestiges of a welfare state are dismantled, a culture of ownership will spring up. The ranks of Republican voters, the idea goes, will swell along with it.

``The ownership society looked very attractive on paper,'' said Jacob Hacker, a political science professor at Yale University in New Haven, Connecticut. ``But once you flesh out the changes, people become very concerned because they are already fearful that their economic security is slipping away,''

Those fears are playing out as campaigns are getting underway for the November congressional elections.

``I don't see many Republicans stressing it, emphasizing it or raising it during the campaign,'' said U.S. Representative Peter King, a Republican from New York. While younger voters may be more willing to accept risk, ``the older you get, the harder it is to fully accept this shift.''

Outside Threats

Some of the insecurity stems from the quarterly statements that many Americans are getting for their 401(k) retirement funds and other accounts. Stocks are stammering at the same time government statistics on jobs, productivity and gross domestic product are showing economic strength and continued growth.

Since the Sept. 11 terrorist attacks and the war in Iraq, exuberance about the economy has been overtaken by gnawing unease about the future, according to Robert Solow, 1987 winner of the Nobel Prize for economics and professor emeritus at Massachusetts Institute of Technology in Cambridge.

``Investors are worried that something is going to blow up tomorrow -- they just think it's a crazy world,'' Solow said.

Harvard economist Robert Barro points to a ``lingering geopolitical risk and this sense in the financial markets that there is this probability of something really terrible happening related to international terrorism.''

Performance Factors

Anxiety about terrorism and the war isn't the only reason stocks have struggled to keep pace. Companies still are shedding excess plants and equipment built up during the boom years of the 1990s. At the same time, low inflation and the globalization of markets means companies can't raise prices at will.

The S&P 500 index during the past half-century has risen on average 8.1 percent a year. The index rose 3 percent last year, when Federal Reserve figures show corporate profits reached a record of about $1.3 trillion. In 1999, a year the S&P 500 rose 20 percent, corporate profits were $806 billion.

By comparison with other two-term administrations of the past half-century, the index grew 153.6 percent at this point during the presidency of Bill Clinton, 79.7 percent for Ronald Reagan, 61.9 percent under Dwight D. Eisenhower and 45.4 percent during the Kennedy-Johnson administration. At the same stage in Nixon's presidency the S&P dropped 4.1 percent.

Risk Concerns

Concern about market risks meant Bush last year had to backpedal from a centerpiece of his ownership campaign -- adding private investment accounts to the Social Security system. His other plans, such as having individuals use tax-free accounts to pay for medical costs, may face a similar fate as the Republican congressional majority shies away from programs that shift more decisions and risks to consumers who've demonstrated they want neither.

``Republicans don't want to go anywhere near the ownership society'' in an election year, said Hacker, author of the book ``The Great Risk Shift,'' which is scheduled for publication in August. ``You're going to see very little attention to these larger themes.''

Last year, the ownership society was the centerpiece of Bush's domestic agenda. He crisscrossed the country, getting applause for his oft-repeated desire to see ``ownership spread throughout all our society.''

This year, Bush didn't utter the word ownership in his Jan. 31 State of the Union. In speeches around the country he has have downplayed themes of personal responsibility and expanding the ``investor class.'' Instead, he focuses on maintaining the ``competitiveness'' of the American economy, providing consumers with more ``transparency'' on health-care costs and reaking a U.S. ``addiction'' to oil.

Timing

The idea of giving individuals a greater stake in the economy ``is broadly appealing, but it works best when the market is clearly performing well and rising,'' said James Lucier, senior analyst with Prudential Equity Group LLC in Washington.

Not all is bleak on the ownership front. As Bush frequently points out in speeches, the home ownership rate rose to a record of 69.2 percent under his administration, from 67.5 percent when he took office. The value of mortgages stood at $8.66 trillion at the end of 2005, from $5.22 trillion in 2001, Federal Reserve figures show, while individual stock holdings have fallen to $6.08 trillion, down from $6.72 trillion 2001.

Stocks may continue to remain short of previous highs. The consensus forecast of 15 equity strategists surveyed by Bloomberg News in early March is for an S&P 500 index to finish the year at 1,353, which would be an 8.4 percent gain for the year. That's still below the high of 1,383 during Bush's tenure reached on Jan. 31, 2001 -- about a month before the economy slipped into recession.

Stocks would be 10 percent to 15 percent higher without the geopolitical risks that stem from the Bush administration's foreign policies, said Allen Sinai, chief global economist at Decision Economics Inc. He predicts the S&P 500 index -- whose 3 percent rise last year when ranked globally bested only China, Malaysia and Venezuela's stock markets -- will rise to as high as 1,375 this year, from yesterday's close of 1,305.

``In the midst of a very nice business expansion, there is a kind of pall in the attitudes of Americans about how this administration is performing,'' Sinai said.

To contact the reporter on this story: Brendan Murray in Washington at brmurray@bloomberg.net

Last Updated: March 23, 2006 00:01 EST