The era of free money is over. Money has a "price again," a positive interest rate that borrowers must pay to lenders. And that brings back the old game on Wall Street when investors purchased financial assets based on fundamentals rather than on a narrative.

For years, central bankers printed money like there was no tomorrow, driving short-term and long-term interest rates near zero. That's thanks to the "disappearance of inflation," which allowed them to focus on pursuing maximum employment rather than price stability.

While easy money has helped central bankers to get close to the elusive goal of maximum employment, it had a "side effect," most pronounced during the COVID pandemic. It fueled a speculative frenzy on Wall Street, which distorted capital allocation, according to Patrick Wells, Portfolio manager & CFA at Pinnacle Associates.

"One hallmark of the COVID bull market was indiscriminate buying across the riskiest companies with unproven business models," he told International Business Times.

Bryan Shipley, CFA, CAIA, Co-CEO, Chief Investment Officer, Managing Principal, and Senior Investment Advisor, agrees. He thinks that low borrowing costs have made it possible for investors to expect double-digit returns on speculative assets like commodities, real estate, and cryptocurrencies.

"As a result, they had to rush to put their money into work for fear of missing out on that growth," he told IBT.

In the last year, the economic situation has changed. Inflation has appeared again, reaching a 40-year high in some countries. And that has forced central banks to end the era of easy money by hiking interest rates. For instance, in the last six months, the Federal Reserve has raised interest rates several times, bringing the Federal Funds rate to 3.25%, up from 0.25% a year ago.

In addition, the Fed has begun to unload its Treasury Bonds and Mortgage-Backed Securities (MBS), pushing Treasury bond yields and mortgage rates higher. For instance, the 10year Treasury bond yielding 0.55% in 2020 is now paying 3.60%. Likewise, the 30year mortgage rate, which in 2020 stood at 2.90%, is now over 6%.

Rising interest rates have made money costly again, bringing back the old game on Wall Street. As a result, investors now have to pay attention to the economic fundamentals of different assets, like the companies' business model behind equity shares, their revenues, earnings, free cash flow, and leverage rates.

"A rising tide lifts all boats, even those that aren't very seaworthy," Robert R. Johnson, Ph.D., CFA, CAIA, Professor of Finance, Heider College of Business, Creighton University, told IBT. "The end of free money means that investors are becoming more discerning and demand that potential investments have a sustainable business model and are cash flow positive or have a path to being so."

Johnson further thinks that under the free money regime, many assets were trading on a narrative rather than on fundamentals, as investors had no viable alternatives in money market funds and bonds, which paid tiny yields. But the situation is changing with bond and money market yields rising for the first time in years. Moreover, speculative assets lead the correction in financial markets, as seen in the significant declines in cryptocurrency markets and small tech shares in NASDAQ.

Still, Shipley sees opportunities in the new environment of tighter money in the beaten shares of selected small cap, value, and international stocks as having growth potential.

"And for capital preservation, holding cash and ultra-short and low duration bonds continue to look attractive in the short term while the world waits for higher-returning defensive opportunities to become available," he added.

Scenes near Wall Street and the New York Stock Exchange (NYSE), in New York