Shop wisely.

That’s the advice Wall Street analysts have for those looking to invest in retail chains this year — despite the brightest holiday season the industry has seen in years.

Yesterday, the Standard & Poor’s Retail Index surged to its highest level in three years, fueled by optimism about December sales reports due from retailers later this week.

Last week, MasterCard Advisors’ SpendingPulse said retail surged 5.5 percent during the 50 days leading up to Christmas, the strongest holiday performance since 2005.

And although many investors are betting that results for the crucial fourth quarter will surpass Wall Street’s expectations, it’s not necessarily a safe bet that retail stocks will continue to outperform the broader market.

“Our [retail] sector outlook for 2011 is a replay of 2010 in terms of sales growth,” said Matthew Kaufler, a portfolio manager at Federated Clover Investment Advisors.

“But that doesn’t necessarily mean there will be a replay on stock performance.”

While the S&P Retail Index surged 25 percent last year, Kaufler believes most retail stocks this year will be limited to percentage gains in the high single digits.

Continued sales increases already appear to be baked into the shares, he said, despite lingering risks for consumer spending.

Also, gasoline prices look poised to surge well beyond the $3 mark this year, sapping away shoppers’ discretionary income, while unemployment hovers above 9 percent.

“That scenario is not far-fetched and is a central risk going forward,” Kaufler said.

“If gasoline rises even higher, I do think you’d start to see revenues tighten up [for retailers] — and misses on the earnings line.”

Some analysts remain upbeat, however, noting that retail shares climbed last year despite a slew of jitters, including the European debt crisis.

JC Penney, Macy’s and Target got a boost yesterday after Citigroup analyst Deborah Weinswig recommended their shares, saying “tailwinds will outweigh headwinds and translate to modest growth in spending.”

One big positive: retailers are managing their business “better than ever,” with tightened operations that are wringing out more profit per dollar of sales, according Charles Grom, a retail analyst at JPMorgan.

Still, the landscape remains treacherous for some shops in the mall. A tight job market for teens isn’t helping some of the chains that cater to their fashion whims.

Abercrombie & Fitch has been clearing its holiday inventories effectively by lowering its prices, according to Eric Beder, an analyst at Brean Murray.

But even with deep discounting, Abercrombie’s lower-priced rival American Eagle Outfitters is having trouble selling its “boring looks,” Beder said. jcovert@nypost.com